The post-holiday trading week dawned bright for shareholders of YRC Worldwide (YELL). After a weekend of pent-up demand, buyers exploded onto the markets in a frenzy of stock shopping Tuesday. But why?
The reason investors are so hot on YRC's prospects (again) is actually pretty simple: The on-again, off-again negotiations between management and employees, aimed at securing a long-term labor contract so that the company can refinance its debt -- are on again.
On Friday, after close of trading for last week, and long before anyone would be able to begin trading again this week, YRC management confirmed that it has reached a "tentative agreement" with the leadership of the International Brotherhood of Teamsters. The substance of this agreement: Teamsters leadership will back passage of a new collective bargaining agreement that will lock workers into a new compensation structure, and new rules for work, that will stretch to March 2019.
Despite having four days in which to clarify what exactly is contained in this "tentative agreement," YRC has yet to do so. So far, all they've let on is that the new deal "contains a number of revisions to the company's previous proposal" -- which was rejected two weeks ago in a resounding, 61% to 39% rebuff.
What comes next
Sometime today, local union representatives are expected to review the terms of YRC's revised contract proposal. Presumably, if the union reps find the new terms acceptable, this review will be followed by a new vote on the revised terms by union membership.
At that point, there will really be only two possibilities: Either the union approves the contract, and YRC proceeds with plans to convert $300 million-plus worth of its debt into equity, as lenders take a greater stake in the company in exchange for lowering their demands for annual interest ... or the union rejects the contract.
In management's view, though, there's really only one choice: "The MOU extension is ... the best -- and only remaining -- path forward." Failure to approve it likely means failure of the company to survive.
