(Source: Business Wire)
Following today's announcement that YRC Worldwide Inc. (Nasdaq:YRCW) has revised down its earnings outlook for the third quarter, Fitch Ratings has downgraded the Issuer Default Ratings (IDRs), senior secured notes ratings and senior unsecured ratings of YRCW and its Roadway LLC and YRC Regional Transportation, Inc. subsidiaries. In addition, Fitch has affirmed YRCW's secured credit facilities rating. The ratings actions are summarized as follows:
YRC Worldwide Inc.
--IDR downgraded to 'BB' from 'BB+';
--Secured credit facilities affirmed at 'BB+';
--Senior unsecured downgraded to 'BB-' from 'BB'.
Roadway LLC
--IDR downgraded to 'BB' from 'BB+';
--Senior secured notes downgraded to 'BB-' from 'BB'.
YRC Regional Transportation, Inc.
--IDR downgraded to 'BB' from 'BB+';
--Senior secured notes downgraded to 'BB-' from 'BB'.
Fitch's ratings apply to approximately $1 billion in consolidated debt and a $950 million revolving credit facility. The Rating Outlook for YRCW remains Negative.
This morning, YRCW announced a revision to its earnings estimate for the third quarter, due, in part, to operating conditions that have been even more difficult than anticipated. Excluding one-time items, YRCW now expects to record a slight loss from core operations in the quarter, down from prior expectations for a modestly positive profit from operations. The downgrade in the ratings of YRCW and its subsidiaries is based on Fitch's increasing concern that the weak demand environment, although affecting volumes across the entire less-than-truckload (LTL) industry, is challenging YRCW more than many of its competitors. In addition, although today's announcement that the company will integrate its Yellow and Roadway operations into a single network could strengthen YRCW's credit profile over the longer term as utilization improves and redundant fixed costs are removed from the network, expectations are that meaningful improvements to YRCW's revenue stream and cost structure arising from the initiative will not be seen for at least several quarters. Full benefits from the restructuring, estimated at $200 million annually, will not be achieved until the integration is complete, which likely will not be until early 2010.
Volume performance for both the National and Regional transportation units was especially weak in the second quarter, with the company reporting steep year-over-year declines in tonnage per day, while many other LTL carriers reported modest tonnage gains.
