Shares of trucking logistics firm YRC Worldwide (YRCW) are continuing a downward spiral begun on Thursday after the trucking company said it made the deadline for its debt-for-equity swap to avoid bankruptcy. The shares this morning are off 9 cents, or 11% at 75 cents.
Credit Suisse analyst Chris Ceraso writes in a note to clients this morning that by eliminating half a billion in debt and gaining access to a revolver for working capital, YRC avoids bankruptcy “for now.” The focus now turns to retaining and winning back customers, and solvency will hinge on moving more freight through the transport network, which may be helped by a gradually improving economy. However, prices in the so-called LTL market are still coming down, and Ceraso warns that some investors who thought YRC would be liquidated might have to rethink their investment in competitors Con-way (CNW) and Old Dominion (ODFL). There could be 10% to 20% further downside in their stocks, he believes.
Ceraso has an “Underperform” rating on shares of YRC and a $1 price target. I should note that Jason Seidl of Dahlman Rose & Co. late Thursday issued his own summation of the matter, writing that with $172 million in cash at the end of the third quarter, YRC should be able to continue as a going concern “well into 2010.” However, the company will have to come up with new funds to pay holdouts on the debt swap, and that will likely come via a new stock offering, he believes, as the company has little chance of raising new debt.
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