YRC Worldwide Inc (NASDAQ: YRCW) is making a run for the top, trading on gains of nearly 100%. The gains come after the company said that it is taking out a $700 million loan from the United States Department of the Treasury. Here’s what’s going on:
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YRCW Stock Rockets On $700 Million CARES Act Loan
In the release, YRC Worldwide said that the Treasury will provide a $700 million loan to the company under the CARES Act.
In the release, YRCW said that it has been significantly impacted by the COVID-19 pandemic. Importantly, the company employs around 30,000 people. Of course, it provides healthcare, pention, and other perks to its employees, which with COVID-19-related struggles has become difficult.
Nonetheless, the company will use the funds from the $700 million loan to pay for deferred healthcare and pension costs as well as other contractual obligations.
In exchange for the loan, the company has agreed to issue the United States Treasury new shares of its common stock equal to 29.6% of the value of the company. In a statement, Darren Hawkins, CEO at YRCW, had the following to offer:
We would like to thank Congress for passing the CARES Act and the U.S. Department of the Treasury for providing this vital funding which recognizes the essential role YRCW plays in the nation’s supply chain. Through our work with over 200,000 customers, including being a leading transportation provider for the Departments of Defense, Energy, Homeland Security, and Customs and Border Protection, YRCW’s freight professionals have developed a deep understanding of, and expertise in, the importance of a secure and reliable supply chain.
Our 30,000 employees have continued to serve hundreds of quarantined communities across the country during the pandemic and this financial assistance will enable us to bridge this pandemic-related crisis and continue to provide essential shipping services for the nation’s supply chain. The funding will also enable us to continue successfully implementing our multi-year strategic plan to transform our five powerful brands to operate as ONE Company, ONE network to better serve our customers and the nation’s supply chain as economic recovery takes hold.
Why This News Is Exciting
Usually, when new shares are issued in an attempt to gain liquid assets, the value of a stock will fall. However, dilution seems to be trumped by necessity today.
Ultimately, YRCW has been struggling as of late, and without access to liquid funding, would likely continue. The injection of $700 million into the company’s balance sheet is a much needed move, and one that’s welcomed by investors, even at the cost of dilution.
The bottom line is that this loan will provide the company with the funding it needs to get through and beyond the COVID-19 pandemic. That’s exciting news that makes YRCW stock one that should be watched.
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