Bailout of Trucking Company YRC, Near Bankruptcy Before Covid-19, Ripped by Congressional Watchdog

It wants to know: Why was YRC even bailed out? And why was the taxpayer put at so much risk? What’s going on here?

By Wolf Richter for WOLF STREET.
The US government’s $700-million bailout under the CARES Act of long-troubled YRC Worldwide, one of the largest less-than-truckload (LTL) carriers, has come under fire by the Congressional Oversight Commission, which is supposed to monitor how the trillions of bailout dollars are getting distributed.

The bailout gave the government a 29.6% stake in YRC in lieu of higher market-based interest rates on the loan. That trade-off also came under fire, given the iffy fate of the shares in an eventual restructuring of YRC.

Let’s put something straight first: All bailouts are primarily a bailout of stockholders and bondholders. That was the case in the YRC bailout as well. In the 10 trading days straddling the bailout announcement on July 1 and its finalization on July 8, YRC’s shares [YRCW] soared 122%, from $1.57 on June 25 to $3.49 on July 10.

The company has been wrapped up in a tangle of problems for years. It has been junk-rated for over a decade. Moody’s rates it Caa1 and S&P CCC+, both deep-junk (my cheat sheet for corporate credit ratings). Its shares have collapsed starting in January 2018, from a range of $12-$18 a share to $2.57 at the beginning of 2020, per-Covid. Shareholders weren’t exactly brimming with hope, when the pandemic hit the trucking business.

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