YRC Worldwide is looking for a way out of a death spiral debt trap. Its creditors are giving it a little slack, but other stakeholders may not be so understanding:
YRC Worldwide is asking the Teamsters union and pension fund managers for more time to restructure the trucking company’s troubled balance sheet.
I have to hand it to YRCW's management. They manage to stave off one short-term disaster after another. The Teamsters are a different story. The new creditors' agreement may embolden them to ask for accelerated reinstatement of the pension plan contributions they surrendered.
Recapitalizing a balance sheet involves writing down debt and/or injecting equity. Forget about the debt writedowns; creditors extended the payment timeline with the expectation that their positions won't be written down at all. That leaves YRCW with a need for more equity in Q1 of 2011. Hmmm, they just went through a reverse split to raise their share price past the de-listing threshold, so issuing more shares means dilution. They'll be right back in the NASDAQ de-listing queue with that move.
I still don't see a happy ending for this company, but comatose patients have been known to hang on for years before either reviving or expiring. I am not aware of any coma patient who could revive while a cancer was eating away inside them. YRCW's cancer is its unionized workforce. It is time to cut them out to ensure survival.
Full disclosure: No position in YRCW.