Bad news for YRC Worldwide
Today's Financial News - Posted December 17, 2009
It is not good news for YRC Worldwide (NASDAQ:YRCW). As more bondholders refuse to swap for shares, the company’s hopes of success dwindle.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): By all traditional measurements, the stock is dead. The only reason shares are going for a buck each is due to artificial life support that cannot possibly last.
So the question is how long until they pull the plug on YRC Worldwide (NASDAQ:YRCW)? If we judge by the reaction from the company’s bondholders, a visit in front of a bankruptcy judge is not far away.
Let me preface all of this by letting you know right out of the gate I am a biased reporter.
Over at TFN Strategic Trader, we recently racked up gains of 94% playing the company’s ability to stave off the bankruptcy wolves. A well-timed covered call play was all we needed to lower risk and increase our reward.
But over two months since we pulled our gains and fled from the stock. Since then, a lot has happened. Actually, no, nothing has happened. That’s the problem.
Locking up the brakes
As a major trucking company, YRC needed the nation’s economy to come roaring back in a hurry. But ask any truck driver, railroad conductor or barge captain and they will tell you one thing.
”There is not much moving these days.” I heard the words first hand this week.
With shipping demand remaining close to the recession’s lows, YRC has little chance of finding a profit and the cash necessary to deal with its $3.5 billion worth of debt.
So, it did what any company would do. It kindly asked bondholders to turn the debt into stock. It was the equivalent of asking to trade a beat up old Ford for and even uglier old Huffy.
In bankruptcy, bondholders won’t get all they are owed, but they know they will get more than any shareholder. That’s why when the company recently offered a debt-to-equity exchange to its bondholders, they got a you-gotta-be-kidding-me response.
So far, YRC has been forced to “extend” its exchange deadline several times in hopes of pushing a few investors off the fence. If the deal doesn’t happen, they will pull the plug very soon.
YRC is on life support. Unless a miracle happens and bondholders make serious concessions, the company is trucking its way to bankruptcy court.
We made our money on the company. If you haven’t made your share, don’t try to do it now. There is trouble ahead.
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