OVERLAND PARK, Kan. (
shares fell sharply on a massive spike in volume Monday after the trucking giant revealed details of its debt exchange offer, which would mean massive dilution if successful.
said its exchange offer, with full participation, would see noteholders exchange approximately $536.8 million in notes plus accrued and unpaid interest for shares of common stock and new Class A convertible preferred stock. Together on an as-if converted basis, it would represent 95% of YRC Worldwide's common stock. The offer also contains a provision to give stock options to the YRC Worldwide's union employees.
The debt exchange is expected to help YRC Worldwide gain cash and remain afloat. In recent months, the company has struggled while trying to stave off bankruptcy, resorting to massive job cuts and selling real estate.
Several analysts weighed in on the debt offering Monday after the company's announcement. RBC Capital Markets said in a research note that the firm believes that YRC's stock has no value and therefore their price target is zero.
Meanwhile, JPMorgan analysts said that based on the current base of about 60 million shares, 95% ownership would imply that YRC Worldwide would issue 1.2 billion shares to noteholders. If the post-exchange share count totals 1.2 billion to 1.3 billion, the implied value of YRC Worldwide shares would only be around 80 cents a share.
Last month, YRC Worldwide said its lenders had agreed to extend certain provisions under certain credit facilities until Oct. 30. "By extending the revolver reserve, we retain the flexibility needed to reach an agreement with the lenders that will fully support our comprehensive plan," Bill Zollars, YRC Worldwide's chairman and CEO, said in a statement on Oct. 12.
Shares of YRC Worldwide were dropping by $2.05, or 56.2%, to $1.60. Earlier in the session, the stock touched an intraday low of $1.58. More than 37 million shares changed hands by 1:30 p.m. EDT Monday, compared to the stock's 50-day average daily volume of 10 million, according to the
As of Monday, YRC Worldwide has a 58 million-share float with a massive short interest float of 33.4% as of Oct. 12, according to Yahoo! Finance. Insiders hold only 1.5% of the company's shares with another 76% owned by institutions.
-- Written by Robert Holmes in New York
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