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December 23, 2009

YRC seen making progress in getting equity deal done

Trucker says it has received provisional approval for proposed debt-equity swap from lenders, but details, outlook remain murky.

By Mark B. Solomon

YRC Worldwide Inc. indicated in a government filing Tuesday that it has made progress in satisfying conditions needed to complete a debt-for-equity swap that will stave off a bankruptcy filing and possibly save the company.

However, the nation's largest less-than-truckload (LTL) carrier by sales also did not say the deal, which calls for a certain percentage of YRC bondholders to exchange more than $530 billion in debt for more than 1 billion in newly issued shares, is a fait accompli.

The debt-for-equity tender offer, the deadline for which has been pushed back three timers, is set to expire at 11:59 p.m. New York time Dec. 23. Without sufficient bondholder acceptance, YRC's lenders will not free up a $106 million credit line YRC says it will need by Dec. 31 to make a $19 million payment of interest and fees. Without the funds, YRC will almost certainly file for bankruptcy protection and may be forced out of business.

In a filing with the Securities and Exchange Commission (SEC), YRC said it has received provisional approval from lenders holding what it says are more than two-thirds of the commitments under the company's credit agreement. The company also said that the Teamsters union, which represents 35,000 employees at YRC, has approved an amendment to the credit agreement that will purportedly help move the debt-for-equity swap forward.

Meanwhile, Bloomberg reported today that Teamsters President James Hoffa has asked the SEC and New York State Attorney General Andrew Cuomo to review the "questionable promotion" of credit-default swaps that are tied to YRC. These swaps are financial instruments based on bonds and loans that are used to hedge against losses or to speculate on a company's ability to repay debt.

Hoffa has accused several financial institutions of promoting credit default swaps now held by YRC bondholders. These so-called derivatives would pay out should YRC default.

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