The nation’s largest publicly traded trucking company will ask for $1 billion in aid from the federal bailout fund, as creditors come knocking and business continues to sink, media reports said Friday.
If approved, YRC would become the first trucking company to take help from the bailout fund, officially known as the Troubled Asset Relief Program, or TARP. YRC Worldwide Inc. has laid off thousands of workers, asked remaining workers to take sizable pay cuts and made other tough decisions to remain competitive as the trucking industry suffers from the worst demand in decades.
A spokesman for the Treasury Department declined to comment on whether an official application for aid had been filed as of midday Friday. The request was first reported by the Wall Street Journal.
TARP, approved by Congress last year, was originally intended to help banks navigate through the credit crisis, but it has also been used to make loans to auto companies and insurer American International Group Inc.
Treasury Secretary Timothy Geithner told a congressional oversight panel recently that the TARP fund Congress approved last October now has $110 billion that has not been committed. But several companies are trying to repay TARP funds, which would boost the pot for additional Treasury financial assistance.
Overland Park, Kansas-based YRC said in a filing with the Securities and Exchange Commission late Monday there is “substantial risk” that its cost cuts and shipment increases won’t be made in time to meet its minimum requirement for credit facilities in the second quarter, which could lead to a possible default. The company also has substantial pension obligations that have weighed it down.
YRC said it is talking with its creditors to try and nail down an agreement that would keep it in compliance with the terms of its debt.
In a recent interview with The Associated Press, Chief Executive Bill Zollars said the company had other cost-cutting measures “teed up” if they were needed, including closing 20 more terminals across the country in cities where the company has more than one.
Stifel Nicolaus analyst David Ross said a recent note to clients that the company is continuing to lose business to its competitors, which is making it difficult to improve its margins.
And even as other competitors cited a seasonal uptick in freight volumes from March to April, Ross noted, YRC’s national unit volumes were “flat to slightly up from the prior month, implying that volumes in April were down 35 percent to 40 percent” compared with last year.
He also doubts the company will be profitable anytime soon.
The company posted a first-quarter loss of $257.4 million compared with a year-ago loss of $46.4 million.
Shares of YRC lost 21 cents, or 6.4 percent, to $3.06 in midday trading. The company’s shares have plummeted from as high as $22.52 to as low as $1.20 in the past year.
Copyright 2009 The Associated Press.