This was going to be a "quick" post on the pending bankruptcy of YRC, the nation's largest trucking company.

Instead, I have been digging around for several hours as the story morphed into a spiderweb of pension obligations culminating in a Ponzi scheme sponsored by representative Pomeroy to bailout private pension plans at taxpayer expense.

Let's kick this off with the headline that first grabbed my attention.

Bloomberg reports YRC Has Until Yearend to Corral Bondholders, Avert Bankruptcy.

YRC Worldwide Inc. has less than two weeks to persuade bondholders to accept a debt exchange and prevent a bankruptcy filing that its employees’ union says may force the biggest U.S. trucking company to liquidate.

YRC, which has pushed back the deadline for the swap three times this month, must complete the tender by Dec. 31 to avoid a $19 million payment of interest and fees that would leave the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said yesterday in a regulatory filing.

“Bondholders are in the driver’s seat,” said David Ross, a Baltimore-based analyst at Stifel Nicolaus & Co. who has a “sell” rating on the stock. “They could force the company to file if they don’t tender enough notes, and then there is a high chance the business is liquidated.”

YRC took on debt when Yellow Corp. acquired Roadway Corp. in 2003 for $1.07 billion and then bought USF Corp. in 2005 for $1.37 billion. The company has $1.6 billion of loans and bonds, according to data compiled by Bloomberg.

Concern is growing that the company wouldn’t survive a bankruptcy filing because customers would defect, said Iain Gold, a director in the strategic research department of the International Brotherhood of Teamsters, which represented about 40,000 YRC employees as of January.

YRC’s $150 million of 8.5 percent notes due in April fell 1.25 cents on the dollar to 59.75 cents yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The shares declined 7 cents, or 6.8 percent, to 94 cents, after earlier rising as much as 15 percent, on the Nasdaq Stock Market.

The trucker must complete the exchange as part of agreements with its banks, the Teamsters and multi-employer pension funds, according to a Nov. 24 regulatory filing.

Goldman Sachs Group Inc. was creating derivatives trades that would profit from a bankruptcy, Teamsters President James Hoffa wrote in a Dec. 16 letter to Lloyd Blankfein, chief executive officer of the New York-based bank.

Goldman Sachs spokesman Michael DuVally confirmed the bank received the letter and said in an interview “Goldman does not have a position in the company, nor are we making markets in the company’s bonds or credit-default swaps.”
YRC Seeks $1 Billion Pension Bailout From TARP

Flashback May 15, 2009: Troubled trucker YRC to seek $1 billion pension bailout.
Struggling No. 1 U.S. trucking company YRC Worldwide Inc plans to seek $1 billion in bailout money from the Troubled Asset Relief Program to help it cover pension obligations, a move analysts say is unlikely to succeed as the company has no financial charter.

YRC, which has been shedding jobs and closing facilities to cut costs in the face of the U.S. recession, faces an estimated $2 billion in pension obligations over the next four years.

YRC will submit an application to the Treasury as early as Friday, a move that was first reported by the Wall Street Journal.

Pension Fund Problems

Company Chief Executive Bill Zollars complained in the WSJ article that the Central States multi-employer pension fund that it pays into is unfair because YRC ends up paying for truckers who never worked for the company.

Multi-employer pension funds were set up decades ago prior to the deregulation of the trucking industry to ensure that workers' pensions were protected even if they changed companies. Over the past 20 years, thousands of trucking companies have collapsed, leaving their pension obligations to be funded by those left in the fund.

The Central States fund has been in trouble for years as a result of this problem. The world's largest package delivery company United Parcel Service Inc (UPS), which had more than 40,000 employees in Central States, paid a $6.1 billion fee to withdraw from the fund in 2007 and have those employees covered by a single-employer fund jointly managed by UPS and the Teamsters union.

UPS' move was widely regarded by analysts as a smart one, given the poor condition of the Central States fund.
YRC Terminates Pension Contributions

Flashback Jul 21, 2009: Central States Pension Fund Drops YRC Worldwide