After years of denying reality, YRC Worldwide
Executing a plan first unveiled back in April, management issued new convertible notes (receiving $100 million in exchange), and replaced its asset-backed loan facility with a new $400 million ABL. In a note thanking "all the stakeholders -- including union and non-union employees, lenders and customers" for their support, management boasted that the post-restructuringYRC is now "positioned for long-term success."
Um, we're standing right here
There's just one problem with that. "Employees" ... "lenders" ... "customers ..." Notice anybody left out of YRC's thank-you note? That's right -- the shareholders.
To extricate itself from its debt-death-spiral, management had to hand over 97.5% of the company to its lenders, essentially wiping out its shareholders. Or, as YRC characterized it, it "exchanged a portion of the company's loans ... for new securities."
In doing so, YRC deprived existing shareholders of all but "approximately 2.5% of the company's outstanding stock," a number that will shrink even further through "dilution by a proposed management incentive plan and the conversion of new convertible notes."
What's it mean to investors?
If you owned YRC before Friday, you own a whole lot less of it today, and I feel your pain. On the other hand, if you're new to YRC, and considering buying in, maybe management's happy talk is worth listening to. According to equity researcher Zack's, YRC still has its problems. It's losing money, and also gradually losing market share to rivals Arkansas Best
But thanks to the restructuring, YRC will soon have an extra $500 million of liquidity on tap to meet these threats -- and a greatly reduced debt load to boot. Depending on how low the stock price drops after news of the 97.5% dilution filters out, YRC stock might finally be worth a look.
Interested in investing in the new-and-improved YRC Worldwide, or simply curious to see how this all works out? Add the stock to your Fool Watchlist.
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