The US Treasury department has reached a deal to bail out YRC, a struggling US trucking company, with a $700m loan using funds from the $2.2tn stimulus legislation passed in March.
The agreement announced on Wednesday will give the US government a 29.6 per cent stake in the Kansas-based company, which employs 30,000 freight workers, including 24,000 members of the historically prominent and politically influential International Brotherhood of Teamsters union.
The rescue of YRC came from a $17bn pot of money in the US fiscal stimulus legislation designed for companies deemed critical to national security. Boeing was expected to be the main beneficiary of the money, but was able to secure funding independently as corporate credit markets recovered.
The US Treasury said YRC was a vital provider of military transportation, in addition to supplying retail and industrial customers across the country.
“This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers,” said Steven Mnuchin, the US Treasury secretary.
James Hoffa, the Teamsters’ president, described the deal as an “essential bridge loan”.
“They recognised the urgency and acted swiftly to avoid our members’ health benefits from being cut and, in the long term, to protect 24,000 Teamster jobs,” Mr Hoffa said in a statement.
YRC’s stock price jumped 65 per cent in early trading on Wednesday. The company’s market capitalisation was just $70m prior to the Treasury announcement.
YRC carries nearly $900m of long-term debt. Its largest borrowing is a $600m term loan it took out last year. This financing was led by the private equity firm, Apollo Global Management, which had been active in lobbying the Trump administration to intervene in the capital markets during the Covid-19 crisis. In April, YRC negotiated relief on covenants on the loan, which included deferring future interest expense on the loan.
Many large US companies have benefited indirectly from the Fed and Treasury’s moves to shore up financial markets during the crisis, through rising equity prices and the recovery of investor appetite for corporate debt.
But YRC is one of the few — along with US airlines — that have received direct government aid during the pandemic, allowing Treasury to take a large stake.
YRC had warned last month that it may not be able to stay in business due to the crisis, which has led to a plunge in shipments as well as a decline in rates paid by its customers.
Darren Hawkins, the company’s chief executive, said employees had “continued to serve hundreds of quarantined communities across the country during the pandemic”, and the government loan would help it “continue to provide essential shipping services for the nation’s supply chain”.
The American Trucking Associations, a lobby group which represents the trucking industry in Washington, did not respond to a request for comment.