YRC Worldwide Inc.'s struggle to stay afloat took on a new sense of urgency today as the company failed to get 95 percent of its bondholders to agree to a proposed debt-for-equity swap and extended until Dec. 23 the deadline to convince at least 80 percent of bondholders to agree to the deal. This is the third time YRC has extended the deadline for the proposed debt swap, under which bondholders would exchange approximately $530 billion in debt in return for 1 billion shares of newly issued equity.
The lowered bondholder approval threshold comes amid a flurry of activity involving the company, its lenders, and the investment firm Goldman Sachs Group. Michael DuVally, a Goldman spokesman, was quoted by Bloomberg Thursday saying the company is "actively exploring ways" to help YRC. He gave no details.
As of the most recent deadline of Dec. 17, only 57 percent of YRC bondholders had tendered their bonds in return for the new equity. The revised level was down from the 75 percent of bondholders that were originally reported to have tendered their debt.
A successful debt-for-equity swap is a prerequisite for YRC's lenders to free up more than $100 million in a revolving line of credit and for forgiveness of additional millions of dollars in interest payments and other expenses. Should the swap fail, a YRC bankruptcy filing is seen as a near-certainty.
Analysts at JPMorgan Chase & Co. said today that YRC is unlikely to survive beyond New Year's Eve without successfully completing the swap. Morgan analysts note that $19 million in interest and fee payments are due on that date and YRC's liquidity position would be "unsustainable" without access to funds preconditioned on a successful exchange.
Analysts at Robert W. Baird & Co. said today that YRC is "losing the PR battle" and that ongoing delays in reaching an agreement are "further eroding shipper confidence" in the company's ability to survive. The analysts said YRC might be better off proceeding "within the structure of a formalized bankruptcy."