YRCW’s Panned Note-Exchange Offer to be Dilutive
Analyst Lee A Klaskow of Longbow Research maintains his “neutral” rating on YRC Worldwide (NASDAQ: YRCW).
YRCW has announced its plan to spin off its YRC Logistics division to Greatwide Logistics Services. YRCW has indicated that the deal reflected its intention to make YRC Logistics a purely asset-light model. According to Longbow Research, YRCW has opted for the deal to improve its balance sheet, liquidity and cash generation. The company has been very aggressive in rightsizing its network in accordance with the demand, lowering its cost structure and monetizing its assets.
By being a leaner and smaller entity, YRC Worldwide has improved its chances of survival in the current economic crisis, according to Longbow Research. The earnings power of YRCW has, however, declined significantly due to restructuring efforts. Moreover, YRCW’s planned note-exchange offer, which is expected to complete in December 2009, will dilute the company’s earnings, Longbow Research says.
