Zacks_Analysts' Blog : YRC to Divest its Logistics Unit - Analyst Blog

Trucking company, YRC Worldwide Inc. (YRCW) announced to sell a portion of its logistics business to private equity firm Austin Ventures for $37 million, to boost its cash position.

 

The newly formed company will focus on international freight forwarding, customs brokerage and transportation management in North America, Latin America, Europe and Asia. However, YRC plans to retain its China based logistics operations.



The acquisition is scheduled to be finalized within the next one and a half month.



Till date, YRC is facing major challenges including sustaining liquidity, dilution of preferred stock, loss of customers and a weak LTL (less than truckload) market. The company is trying to deter total financial collapse in every possible way.

 

YRC also completed its debt-for-equity exchange at the end of December 2009, which will likely be beneficial for the company.



At the end of the first quarter of fiscal 2010, total revenue from this unit was $76.1 million, down 30.8% year over year. Cash and cash equivalents were $130.3 million versus $97.8 million in the first quarter of fiscal 2009 and unused revolver reserves were $107.0 million and unrestricted availability was $4 million within the Company's $950.0 million revolving credit facility.



YRC faces stiff competition from FedEx Freight, Conway Inc. (CNW), Arkansas Best Corporation (ABFS), Old Dominion Freight Line and Expeditors International of Washington.

 

Despite prudent moves to manage liquidity amid the recent deterioration in volumes and operating profitability, we believe YRC continues to consume cash for operations. In the near term, we believe YRC's intermediate-term bankruptcy risks are considerably high.