Fitch Downgrades YRC Worldwide's IDR to 'C'

YRC Worldwide Inc.

--Issuer Default Rating (IDR) downgraded to 'C' from 'CC';

--Secured credit facilities downgraded to 'CCC/RR2' from 'B-/RR2';

--Senior unsecured affirmed at 'C/RR6'.

YRC Regional Transportation, Inc. (formerly known as USF Corporation)

--IDR downgraded to 'C' from 'CC';

--Senior secured notes affirmed at 'C/RR6'.

Fitch's ratings apply to approximately $537 million in notes, a $111.5 million secured term loan and a $950 million secured revolving credit facility.

The downgrade of YRCW's IDR to 'C' from 'CC' follows today's announcement that the company intends to make an offer to holders of YRC Regional Transportation's notes (known as the USF notes), as well as holders of YRCW's contingent convertible senior notes, to exchange the notes for shares of YRCW common stock. Fitch believes the transaction as contemplated constitutes a coercive debt exchange (CDE) as outlined in Fitch's global criteria report, 'Coercive Debt Exchange Criteria', published March 3, 2009, and available on Fitch's web site at www.fitchratings.com.

The company's announcement of the proposed debt exchange was made in conjunction with an announcement that the company has entered into amendments to its secured credit facility and its asset backed securitization (ABS) facility. The credit facility and ABS facility amendments are contingent upon the company exchanging at least 95% of each of the USF notes and the contingent convertible senior notes into shares of YRCW stock on or before Dec. 16, 2009.

The amendments have modified a number of the terms in both agreements. The most critical changes, however, include a deferral of most of the credit facility's interest and fee payments through Dec. 31, 2010 (or through Dec. 31, 2011, with agreement from two-thirds of the lenders in the agreement), as well as a modification of certain covenants. The covenant modifications include the suspension of the minimum EBITDA covenants until June 30, 2010 (and a modification of the minimum required EBITDA levels thereafter), as well as the deletion of the leverage and coverage ratio covenants that would have been effective in the first quarter of 2011. In addition, the credit facility amendment moves the date that company's $950 million revolving credit agreement is permanently reduced by the revolver reserve amount, which stood at $106 million on Sept. 30, 2009, to Jan. 1, 2012. However, if the debt exchange is not successful, the date that the revolver availability would be reduced by the revolver reserve amount is Dec. 16, 2009.

The ABS facility amendments moved the expiration date of the agreement to Oct. 26, 2010, from Feb. 11, 2010, and reduced the commitment limit of the facility to $400 million from $500 million (as well as reducing the letter of credit sublimit to $84 million from $105 million). In addition, the $10 million fee that was due to the ABS facility lenders today has been moved to Oct. 26, 2010, and, similar to the credit facility amendment, most other interest and fee payments have been deferred, as well.

Because the amendments are effective only upon completion of the debt for equity exchange, and due to the high probability that YRCW's liquidity position could not support paying its near-term obligations on the USF notes (which mature in April 2010) and the 5% contingent convertible senior notes (which can be put back to the company in August 2010), Fitch views the planned notes exchange as a CDE. (Fitch notes that the credit agreement allows the lenders to terminate the credit facility if more than $50 million of USF notes remain outstanding on March 1, 2010, or if more than $50 million remains outstanding on the 5% contingent convertible senior notes on June 25, 2010.) The exchange of debt for equity is tantamount to a material reduction in terms for the note holders, while Fitch views the very real threat of a liquidity crunch and bankruptcy absent the exchange as putting pressure on note holders to participate in the transaction. Should the exchange offer be completed as contemplated, Fitch will downgrade the IDRs of YRCW and YRC Regional Transportation to 'RD' from 'C'. Following the downgrade, Fitch will review the company's credit profile and its modified capital structure and assign a new IDR accordingly. If all of the USF notes are exchanged, Fitch likely will withdraw its IDR on YRC Regional Transportation as there will no longer be rated debt at the subsidiary.

If the debt for equity exchange is unsuccessful, Fitch views the probability of a default or bankruptcy as very high. In such a situation, the IDRs of YRCW and YRC Regional Transportation likely will remain at 'C' until a default occurs or until the company's financial prospects improve sufficiently to warrant an upgrade.

Additional information is available at www.fitchratings.com. The issuer did not participate in the rating process other than through the medium of its public disclosure.

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SOURCE: Fitch Ratings

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