YRC Worldwide Inc. (NASDAQ: YRCW) is seeing much trading interest this morning after it confirmed prior expectations that the company will see positive adjusted EBITDA on a consolidated basis and positive operating income for its Regional Transportation segment for second quarter of 2010.  The company also said that its June business volumes continue to grow sequentially and it announced an asset backed security amendment that would give it better incremental liquidity measures.  Shares are up big in percentage terms, but we want to evaluate its real chance of survival after its implosion has turned one of the largest trucking transport stocks into a penny stock.

YRC’s amended financing facility will boost liquidity as it plans further cost cutting and expense management measures, as well as possible divestitures.  Considering that the company was nearly insolvent in recent months, growing business, winning back some customers, and divestitures would be a welcomed event.

One key issue facing YRC is that negotiation with its lenders and its labor force and pension funds all act as an overhang to any good news.  Workers have made concessions and accepted more skin in the company, and now the company finds itself in a mixed situation where it has a lower labor cost than before but one where labor has a larger voice.

While new borrowing terms were not laid out in detail, a recent credit facility was about $22 million last week, so it is having serious issues in securing credit.  The company noted, “As of June 11, 2010, the incremental availability under the ABS facility after giving effect to these modifications would have been $22 million.”

To boost liquidity on top of cost cuts, YRC is still talking with creditors and is considering the sale of some non-strategic assets or business lines along with possible security sales to raise capital.

YRC is still pursuing litigation against the trustee under the indenture related to the company’s 5% contingent convertible notes. If successful, the company said that meeting the closing conditions under a note purchase agreement to sell and issue additional 6% convertible notes would allow it to utilize the remaining $20.2 million of proceeds held in an escrow for general corporate purposes.

This is simple.  More time and more negotiations equals a longer life-line.  YRC is in a serious hole and even renegotiating its credit facilities and its debt covenants will not assure that the company can ever return to its former days of being one of the top trucking companies.  Even if it can stabilize its current situation, the stock could flounder for as long as the eye can see.  Lastly, many creditors may want YRC to have a reorganization because they could wipe out the current shareholders as is seen in so many situations.   Can companies recovery from penny-stock purgatory?  Sure, but just remember that there are no easy shortcuts in a situation like this.

Shares are up big in percentage terms, but that will offer little solace for those investors who have been in this from when it was a large company.  The stock is up almost 15% at $0.26 on almost 20 million shares so far in the first 25 minutes, but the 52-week trading range is $0.20 to $6.18.

JON C. OGG

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