Treasury provides $700 million loan to YRC
Just days before YRC Worldwide employees lost their health benefits, the U.S. Department of Treasury bailed out the mega carrier with a $700 million loan in exchange for part ownership.
On July 1, the Treasury announced a deal with YRC after the company failed to pay health insurance contributions, putting insurance for thousands of employees in jeopardy. The Treasury is giving YRC $700 million to catch up on those payments. In exchange, the Treasury will receive a 29.6% equity stake in the company.
YRC’s $700 million loan from the Treasury comes from the CARES Act.
Earlier this year, YRC employees received a letter informing them of suspended insurance. The company was unable to pay its contribution for work performed during March, April and May. Consequently, the insurance company, TeamCare, suspended coverage until YRC met its obligations.
Fortunately, those employees received some relief. Workers who are laid off receive continued coverage up to eight weeks. TeamCare extended that coverage to active YRC employees during the suspension. As a result, eligible claims incurred after May 10 – up to eight weeks – may be paid despite the suspension.
Those eight weeks were scheduled to run out around July 5. As the clock continued to wind down, YRC still had not caught up with its insurance contributions. Without the government bailout, employees would likely lose all health insurance benefits. Including its subsidiary companies, YRC employs about 30,000 people.
YRC will receive the $700 million loan in two parts:
- $350 million to cover short-term contractual obligations and certain other obligations including pension and healthcare payments. The loan terms are a London Inter-bank Offered Rate (LIBOR) benchmark plus 3.5%, consisting of 1.5% cash and 2% payment in kind. This loan matures on Sept. 30, 2024.
- $350 million for essential capital investment in trailers and tractors. An expected interest rate of LIBOR plus 3.5% in cash. This loan also matures on Sept. 30, 2024. LL