YRC Seeks to Temporarily Fund Pensions with Real Estate Collateral Instead of Cash
This story appears in the April 20 print edition of Transport Topics.
YRC Worldwide Inc. said it is negotiating with the Teamsters union and its pension fund representatives to postpone cash payments into the plan and replace them with real estate collateral as part of the company’s ongoing effort to conserve cash.
The April 13 regulatory filing said the move to pledge real estate collateral instead of making payments would save between $102 million and $135 million per quarter for an unspecified period.
A spokesman for the union and a spokeswoman for the company declined to comment to Transport Topics.
YRC’s 40,000 Teamsters already have agreed this year to a 10% wage cut designed to save as much as $250 million a year. In exchange, the union received a 15% stake in the company, which ranks No. 4 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada.
As part of the talks, YRC is negotiating with its lenders, who are being asked to allow the company to pledge some assets to back pension payments that may be securing bank loans now.
The move, if it is made, would not help YRC remain in compliance with future debt covenant limits, Wachovia Securities analyst Justin Yagerman wrote in an investor note. It would help cash flow and liquidity, he wrote, though it would reduce the amount of real estate YRC could sell and lease back.
YRC has relied on those transactions, which now have reached nearly $275 million, to boost its cash position.
The carrier said in the filing that it doesn’t expect the move to have any effect on health and welfare benefits for its union workers.
Last year, YRC’s pension fund contributions to union workers at its national and regional less-than-truckload services totaled $554.1 million.
Meanwhile, the trustee for the Central States Pension Fund, which disburses retirement benefits to union members, said in a quarterly financial report that the fund’s assets declined 35% last yearto $17.4 billion, partly because of investment losses. UPS Inc. made a $6 billion payment to escape from the fund in 2007, increasing its assets in that year.
In a separate development, Canadian operations were rebranded “YRC Reimer” after the integration of the Reimer and Yellow LTL services in Canada.
That move led to the closing of 13 terminal facilities, leaving a total of 26 in operation. All but 50 to 60 workers who had been at the separate operations lost their jobs as a result of the integration, YRC Reimer President Clayton Gording told TT.
A total of about 1,800 workers are on the job at YRC Reimer, Gording said. Reimer was part of the Roadway unit of YRC before the Canadian operations were consolidated last month.
In the United States, YRC has cut 2,000 jobs and plans to trim 1,000 more this year as part of its national LTL integration. The terminal network is expected to shrink further from the current 450, leaving 34,000 workers and 400 terminals by the end of the year, YRC said last week.
“We are totally together,” said Gording, who said the transition was aided by the fact that some operations already had been combined in Saskatchewan and Alberta. “Our primary focus is to concentrate on the new brand.”
Like the U.S. operation where tonnage has been hurt by the recession, YRC Reimer’s volume this year is down more than 20% on international shipments and about 15% on freight moved within Canada, he said.
