YRC would be a formdidable competitor if it shed all of its debt, and culd reject any conract (including union contracts) and leases it wanted. Of course the common stock will be wiped out and wages wil be much lower, but the new YRC will take market share since its physical assets will still be iatct but wil have a much lower cost structure.
Unlike the auto companies this would be a real ch 11 bankruptcy as opposed to government/union bailout
typically when an LTL carrier goes backrupt, the creditors have immediately secured all the locations, holding freight hostage until they collect their accounts receivable.
Let's not forget the Ryder/PIE situation many years ago. The creditors audited all the freight bills for up to 24 months before BK and took customers to court for freight charges where they felt rates were not applied incorrectly or the customer could not produce adquate documention to quantify the earlier rating of their freight bills.
Hundreds of LTL carriers have declared bankruptcy in the past 30 years. How many have operated successfully in bankruptcy?
By the way, I think that the banks are fully collateralized on their loans, with liens on YRCW land and buildings.
people buy airline tickets weeks and sometimes months in advance. (Freight is shipped on airlines also). Once the company files ch 11 and then announces that opperations will resume as normal, most shippers will still use it.
There is some risk when dealing with a ch 11 company, some who bought airline tickets in advance lost when carriers went from ch 11 to ch 7 and liquididated. However, the lure of much lower freight rates (as the vastly reduced wage and benefit levels and the elimination of most debt service payments are passed thru to customers) will attact many shippers.
Who do you believe would finance us out of chapter 11... Yes, contracts can be broken and the stockholders would lose everything... But you seem to forget that the debt holders do have their rights... You just don't file chapter 11 and wipe out the debt and keep your assets... The debtors have the right to at least the liquidation value of your assest even though that may only be pennies on a dollar... If you don't have someone willing to finance the bankruptcy then the credit holders have the right to insist on liquidation to recover whatever money is possible... Remember, there are already liens on much of our real estate...
The federal government is financing the bankruptcy for the auto industry and it's costing between $30 to $50 billion for GM alone...
There's good reason no trucking company has ever done chapter 11 and it's not an option... If YRC goes bankrupt, it will be liquidated...
The old creditors become the new shareholders in a ch 11 bankruptcy. Most of the major airlines went bankrupt in the last 8 years (UAL,DELTA, NWA, etc.) they all were able to finance fuel and other costs with DIP fincnacing and reduced wages and benfits via section 1113 of the bankruptcy code. The secured lenders who have claims against the truck and other physical assets generally allow the debtor to continue to operate in ch 11 since some paymenst arebetter than none.
Except trucking companies can't go chapter11 as all the fuel would instantly be on a cash in advanced basis only!
Yes that would be simple just to wipe out the debt but this ia a service industry and is fuel intensive. Customer claims would also go out the window and that would be a real sales point!
Bullet point: "... and by the way we're not paying claims anymore"
I can see account managers breaking that news to the industry!