The U.S. Department of the Treasury is set to lend the YRC Worldwide Inc. trucking company $700 million in exchange for a 29.6 percent equity stake in the logistics giant, which specializes in LTL (less-than-truckload) shipping.
According to a statement from the Treasury, an agreement on the loan was reached with YRC on Tuesday under Division A, Title IV, Subtitle A of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Although the logistics company does not qualify as a small business under CARES, the Treasury said the loan was justified because the Secretary of Defense had certified that YRC’s freight services are “critical to maintaining national security.”
Secretary of the Treasury Steven Mnuchin said his department was pleased to make the loan. “This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers,” he said in the statement.
YRC Worldwide said that the loan will help secure the jobs of some 30,000 trucking and logistics employees, including some 24,000 teamsters.
YRCW CEO Darren Hawkins thanked the U.S. Congress for passing the CARES Act and the Treasury for providing the funding. “Through our work with over 200,000 customers,” Hawkins said in a statement, “including being a leading transportation provider for the Departments of Defense, Energy, Homeland Security, and Customs and Border Protection, YRCW’s freight professionals have developed a deep understanding of, and expertise in, the importance of a secure and reliable supply chain.”
Hawkins said the funding would enable his company to continue to provide shipping services that support American businesses and consumers.
According to YRC, the company will receive the funding in 2 tranches of $350 million, with the loan reaching maturity on September 30, 2024. The deal remains subject to clearance with YRC’s existing lenders.
In order to provide for taxpayer compensation, the Treasury will receive shares amounting to 29.6 percent of YRC’s common stock on a fully diluted basis. The shares will be held in a trust, and the agreement also includes provisions to maintain the number of jobs at the company, as well as limits on executive pay, dividends, and share repurchase options.
Full details of the transaction will be published on the Treasury Department website when the transaction has been completed.
With headquarters in Overland Park, Kansas, YRC Worldwide Inc.’s share price jumped over 66 percent at the news.