YRC Closes on First Part of $151M SLB

OVERLAND PARK, KS-Transportation service provider YRC Worldwide Inc. closed last week on the first part of a $151 million sale-leaseback that will sell 32 of its facilities to Annapolis, MD-based NATMI Truck Terminals LLC.

The first tranche of the transaction, which closed Friday, brought the Overland Park, KS-based Fortune 500 company $101 million of proceeds. The second portion of the deal, expected to close Friday, February 13, will provide an additional $50 million. The deal has a 14% cap rate, with annual lease payments around $21.1 million. A company release says this deal may be the first of many sale-leasebacks it executes in the coming months in an effort to improve cash flow.

YRC executives told investors during a year-end earnings call Friday that it has spent recent months investigating ways to improve liquidity, and that this deal is one step in that process. EVP and CFO Timothy Wicks said the company plans to negotiate additional sale-leasebacks in the future to that same end.

“It is premature to provide specifics on other opportunities but we feel confident that there are attractive options to further monetize a portion of our significant real estate assets of more than $1 billion,” Wicks said, during the call. “Although the bank amendment is still in process, these types of transactions are a key component of the discussions with our banks to improve liquidity.”

During the call YRC executives identified plans for at least two more sale-leasebacks. Each transaction is valued around $100 million.

Beyond seeking sale-leasebacks to free up funds, the executives said they expect to generate $100 million in 2009 through the sale of excess properties. Plans are in motion to remove its operations from about 150 more facilities by the end of the year. By March 1, YRC will be operating out of 450 locations, down from the 704 it once claimed immediately after Yellow Transportation’s merger with Roadway, in September 2008.

However, this may not be the end of the company’s consolidations. “I think that the 450 is probably not the end game. We have plans on the books to take that down as we continue to optimize the network. We will probably end up in a settled-down, steady state situation with more like 400. But that will take us a little while to get there,” said Williams Zollars, YRC president and CEO, during the call.

“The 450 is still down by 150 and the good news there is it’s 100 more locations than either Yellow or Roadway has independently. So it’s a big opportunity to improve efficiency but we’re not going to quit when we get to the 450. We think there’s probably more there.”

Ted Morandin has been following YRC’s recent sale-leaseback as president of Morprop Advisors, an Annapolis-based real estate advisory firm with background in the transportation/logistics field. He says in his experience, sale-leasebacks in the trucking sector are often performed to stave off bankruptcy and can point to serious financial issues within a company.

“YRWC is looking to unload a lot of special purpose real estate in a very difficult environment,” Morandin tells GlobeSt.com. “Most of their user-buyer prospects, while not in as bad a position as YRWC, are also not in very strong cash positions, and many of them are looking to sell similar redundant assets now, so prospects for sales of redundant terminals are dim.”

Shares of YRC stock closed at $2.88 following the company’s earnings call Friday morning, falling 25 cents or about 8%.