RC Worldwide Inc. isn’t getting much support from Wall Street for a tentative agreement meant to preserve the company through a combination of employee concessions and restructured finances.
Shares for the Overland Park-based company (Nasdaq: YRCW) fell 7 cents — 22 percent — in trading Thursday.
YRC and the International Brotherhood of Teamsters announced the agreement on Wednesday, arguing that it’s the best option for making the struggling trucking giant more competitive and preventing another potential brush with bankruptcy.
Chief among the $350 million in proposed cost savings is pushing out the end date of an ongoing 15 percent wage cut from March 2013 to March 2015 and allowing YRC to continue avoiding employee pension contributions until June, when it will pay 25 percent of the effective rate.
The agreement also requires YRC to get commitments for an additional $300 million in financing by year’s end and to get rid of much of its $1.2 billion in outstanding debt, probably by converting it to stock.
That worried Jason Seidl, an analyst with Dahlman Rose & Co. who noted that the company’s stock ballooned to more than 1 billion outstanding shares during the past year as it dealt with its turnaround.
“We are concerned that an equity issuance would further dilute shares and alienate existing investors,” Seidl said in a report Thursday.
Seidl already has misgivings about whether Teamsters members will agree to a third round of concessions, especially as freight levels are rising and other carriers are reversing wage cuts.
YRC plans to deal with the immediate problem of having so many shares by triggering a 1-for-25 reverse-stock split on Oct. 1, which it said would reduce the number of outstanding shares to around 48 million.
Nasdaq has warned the company to get its share price above $1, or it will be kicked off the stock exchange.
David Ross, an analyst with Stifel Nicolaus, told clients Thursday that he saw the stock split as an opportunity, advising them to sell their shares after the stock split is completed, according to the Central Penn Business Journal.
He estimated that shares would be worth as much as $8 each after the split.
Meanwhile, J. Douglas Woodrich, an analyst with Longbow Research, focused on the employee concessions.
He said in a report that he continued to warn investors away from the stock but that he thought the concessions were doable and should help keep the company focused on finding a successor for retiring CEO Bill Zollars.
“We do view these changes as significantly positive as it creates some cost certainty for the next four (plus) years,” Woodrich wrote. “We believe YRCW should be able to survive at least through 2011, and we believe the changes announced yesterday significantly improve the company’s long-term chances.”
