YRC Worldwide Getting Closer To Stable Ground

YRCW's

3Q10 results, base yields, and consolidated operating ratio – were broadly in line, in our view, not just with expectations going into the announcement on Friday morning but with expectations prior to the company's pre- report on October 18. YRCW still faces a significant challenge in needing to reach an agreement by December 31 to convert ~$300M of senior credit to equity or raise an equivalent amount of equity capital. We expect YRCW to be successful with this and remain in business in the medium term. Despite a likely sequential increase in fuel surcharge revenue, YRCW's yield was essentially flat sequentially in both National and Regional in 3Q (vs. 2Q). J.P Morgan believes that LTL pricing is improving but the turn appears to be very gradual. YRCW's total liquidity including cash, and all revolver capacity, improved slightly from $281M at the end of 2Q to $284M at the end of 3Q. We believe YRCW is in a generally stable liquidity position, but liquidity could decline slightly in 4Q due to seasonality. J.P Morgan has a Neutral rating on YRCW YRCW closed Friday at $4.16