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24 Dec 2008
Moody's downgrades YRC's Corporate Family Rating to Caa3
Approximately $540 million of rated debt affected.
New York, December 24, 2008 -- Moody's Investors Service today downgraded YRC Worldwide Inc.'s
(YRC) Corporate Family Rating (CFR) to Caa3 from Caa1. The Probability
of Default (PD) rating and the ratings on YRC's senior notes were
affirmed at Ca. The rating outlook has been changed to negative
The downgrade of the corporate family rating reflects YRC's recent
announcement that it is in discussions with its banks to amend its credit
facilities in order to obtain relief under financial covenants.
This action was announced concurrently with the disclosure by the company
that it has terminated its tender offer to purchase senior notes issued
by both YRC Worldwide Inc. and its subsidiary YRC Regional Transportation,
Inc. The tender offer was contingent upon successful ratification
of the amendment of YRC's contract with its main union, the
International Brotherhood of Teamsters ('Teamsters').
As of December 24, 2008, this amendment has not been ratified,
although the company expects the union to do so shortly. A successful
amendment to this contract will be an important factor in the company's
ability to improve its cost structure through the current cyclical downturn.
With the termination of the tender offer, which would have reduced
much of the company's senior notes outstanding, and with a
significant portion of the company's senior credit facility drawn,
YRC's debt levels have increased materially over the past two quarters.
At the same time, fundamental operating conditions have deteriorated
in the trucking sector, which are expected to have a continuing
negative impact on the financial performance of YRC over the near term.
As such, Moody's believes that YRC will be challenged in meeting
financial covenants as prescribed under its senior credit facilities,
which must be addressed in the amendments sought on these facilities.
Moreover, considering the uncertainty surrounding cash flow that
will ensue from operations over the near term, YRC may face difficulty
in meeting material debt maturities and redemptions in 2010 from its existing
sources of liquidity.
The negative outlook reflects Moody's expectations that the company's
operating results will not improve materially in the near term.
This will likely strain YRC's ability to generate sufficient cash
flow and maintain adequate liquidity to repay debt maturities over the
next two years.
..Issuer: YRC Worldwide Inc.
....Corporate Family Rating, Downgraded
to Caa3 from Caa1
..Issuer: USF Corporation
....Outlook, Changed To Negative From
..Issuer: YRC Worldwide Inc.
....Outlook, Changed To Negative From
YRC's ratings were assigned by evaluating factors we believe are
relevant to the credit profile of the issuer, such as i) the business
risk and competitive position of the company versus others within its
industry, ii) the capital structure and financial risk of the company,
iii) the projected performance of the company over the near to intermediate
term, and iv) management's track record and tolerance for
risk. These attributes were compared against other issuers both
within and outside of YRC's core industry and YRC's ratings
are believed to be comparable to those of other issuers of similar credit
The last rating action was on December 5, 2008 when the Corporate
Family rating was lowered to Caa1.
YRC Worldwide does business through two national less-than-truckload
(LTL) companies, YRC National Transportation, which comprises
the long-haul operations that comprises the legacy Yellow and Roadway
businesses (about 70% of LTM September 2008 revenue), and
through YRC Regional Transportation , a regional LTL business essentially
comprising YRC's acquired USF companies (about 22% of revenue).
Through its YRC Logistics business unit, the company also offers
logistics and supply chain services. YRC's broad service
offering includes next day and expedited service throughout most of the
Michael J. Mulvaney
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
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