Trucking giant YRC Worldwide Inc
After failing to achieve the initially required 95 percent of bondholder participation in the proposed $536.8 million exchange, YRC said it was lowering the minimum tender condition.
It also warned of challenges in financing the retirement of notes not covered in the exchange, and said if a successful exchange of debt for equity is not made before the end of the year, the company's liquidity position would become unsustainable.
The company believes it is critical that it completes the offers prior to December 31, 2009, YRC said in a statement.
YRC is the nation's top less-than-truckload (LTL) carrier but has been struggling to stay out of bankruptcy. It has laid off thousands of workers and cut deals with labor and lenders as it tries to hold onto customers.
Under the new exchange terms, participation from 70 percent of the aggregate principal amount outstanding of the company's 8-1/2 percent notes and from 85 percent of the aggregate principal amount outstanding of the 3.375 percent notes and the 5 percent notes on a combined basis will be needed for the exchange to be successful, YRC said.
YRC extended the expiration date for the third time, to 11:59 p.m. EST December 23.
YRC said its lenders holding commitments of at least 66-2/3 percent under the credit agreement will be required to approve the revised minimum tender condition, and the company said it had already reached a tentative agreement with a steering committee representing the lender group.
The company also needs the approval of multi-employer pension funds who have deferred at least 90 percent of the deferred contributions and said it is in active discussions with its funds.
In a further complication, even if the company consummates the exchange offers at the minimum tender conditions, it will still have $45 million of its 8-1/2 percent notes outstanding. Though the notes mature in April 2010, the amended credit agreement requires all but $15 million of the notes to be retired as of March 1.
The company is restricted by its credit agreement from using any of its operating cash to retire these notes, meaning third-party financing will be required. YRC officials said on Thursday, however, There can be no assurance that the company will be able to obtain this financing prior to March 1, 2010, or that the terms of any such financing will be favorable to the company or its stakeholders.
The company has said the exchange offer for bondholders is crucial to its efforts to restructure. Following the completion of the exchange offers, the company's lenders have agreed to defer nearly all of their interest and fees, which are about $25 million per quarter, and allow the company access to the $106 million existing revolver reserve.
As part of the restructuring, YRC plans to issue up to 42 million shares of common stock and 5 million shares of Class A convertible preferred stock in the exchange, which would give noteholders 95 percent of the company's common stock and effectively wipe out existing equity holders.
The company said on Wednesday that it had entered into a 13th credit agreement amendment with lenders to continue to provide YRC with a $950 million senior revolving credit facility and a loan of about $111.5 million.
(Reporting by Carey Gillam; editing by John Wallace)