Trucking company YRC Worldwide is giving the U.S. Treasury a 29.6% equity stake in exchange for a $700 million Cares Act loan.
The loan will enable the Overland Park, Kan., company to maintain about 30,000 trucking jobs and enable the government to continue to support military-supply operations.
YRC provides military transportation and other hauling services for the U.S. government, including 68% of less-than-truckload services to the Department of Defense.
YRC Worldwide Chief Executive Darren Hawkins said the company has more than 200,000 customers, including the Departments of Defense, Energy, Homeland Security, and Customs and Border Protection.
At last check YRC's shares were up 59% at $2.95. On Wednesday they've traded up as much as 85% at $3.42.
The loan was part of the Coronavirus Aid, Relief and Economic Security, or Cares, Act.
YRC says the covid-19 pandemic significantly hurt the parent and its operating companies, Holland, New Penn, Reddaway, and YRC Freight.
The loan will enable the company to pay for deferred employee healthcare and pension costs and "other contractual obligations as well as to support essential capital investment."
“This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers,” Treasury Secretary Steven T. Mnuchin said in a statement.
The loan, which is subject to the two sides completing definitive documentation, will come in two equal tranches, both maturing Sept. 30, 2024.
The first $350 million will cover short-term contractual obligations and certain other obligations including pension and healthcare payments. The loan terms are Libor plus 3.5%, consisting of 1.5% cash and 2% payment in kind.
The other $350 million will enable capital investment in trailers and tractors, YRCW said. It's expected to carry an interest rate of Libor plus 3.5% in cash.
The loan includes provisions to maintain certain employment levels and limit executive compensation, dividends and share repurchases.