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Rating Action:

Moody's downgrades YRC's Corporate Family Rating to Caa3

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 from developing.

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.

Downgrades:

..Issuer: YRC Worldwide Inc.

....Corporate Family Rating, Downgraded to Caa3 from Caa1

Outlook Actions:

..Issuer: USF Corporation

....Outlook, Changed To Negative From Developing

..Issuer: YRC Worldwide Inc.

....Outlook, Changed To Negative From Developing

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 risk.

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 country.

New York
Michael J. Mulvaney
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
David Berge
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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