US Auto & Truck

One Last Extension For YRC Debt Swap

Arrow Trucking abruptly closed today, sending home its workers this morning. Its truckers were in a difficult spot, where the Arrow gas cards stopped working; the workers were instructed to take any Freightliners and Kenworths they had to the nearest dealer and get a bus ride home via Frieghtliner's Daimler parent; drivers with Navistar trucks had to call in for instructions. Why the truckers have to call Daimler for a ride home is interesting in itself.

YRC was complaining about a lack of liquidity, but Arrow had the near ultimate of liquidity problems when their paychecks started to bounce.

It is increasingly common for firms to go right up to the end before letting workers know things are going to close. I recall one Don Pablo's restaurant closure in Lexington where the store closed as normal on Sunday night and had workers show up on Monday morning to have a note on the door telling them where to pick up their final paycheck; that is often done to keep workers from bailing out on the firm if they tell them they have a few weeks before closing. However, that doesn't leave people stranded thousands of miles away from home on Christmas week.

Arrow, with 4000 vehicles, is the largest trucking closure this year. Many small firms have went under in the last few years, but this is one of the larger casualties. This is a good case of how not to close down a firm, something YRC can take a lesson from if and when they have to go Chapter 7 early next year.

YRC hasn't quite got enough support from its bondholders to do its debt-for-equity swap, and is extending its deadline for completion of the swap to next Monday, December 28th. D-Day is New Year's Eve, when a big bond interest payment is due. That's only a week from now.

Yesterday's Arrow Trucking closure, leaving truckers left out in the cold two days before Christmas, might be a foretaste of what might happen with YRC; a nice story from today had Schneider volunteering to give Arrow drivers a ride towards home. YRC should take note of how not to do things, but they may have nearly as abrupt a crash, for they will strive to make things look at normal as possible in hope of turning things around before pulling the plug.

If you have YRC as one of your LTL shippers, you might be advised to find alternative shipping after the 28th, for your loads might get caught up in any shutdown that might come. Folks like FedEx and UPS are in position to pick up the slack, as are other LTL carriers, but taking all of Yellow and Roadway's business will be a challenge.

In the short-term, a YRC Chapter 7 will be good for the industry, as they'll be off the market while they go through liquidation and freight prices will go up. However, the long term will also see all those YRC trucks and truckers looking for a place to light in the industry; that will depress wages in the trucking industry, lower the price of used trucks and possibly encourage new owner-operators to enter the market.

That's likely why the Teamsters are steamed and are looking for a good scapegoat; they are after the credit-default swap market and are asking for a federal and state investigation. Bondholders with default insurance may want to see YRC go down and get 100% on the dollar.