YRC Worldwide Inc.,

a financially troubled trucker that moves goods for the Defense Department, accounted for almost all of the federal coronavirus relief funding to businesses deemed crucial to national security.

The Overland Park, Kan., company was one of 11 businesses that received loans through the $17 billion program for that sector, with the $700 million that went to the trucker making up 95% of the roughly $736 million in outstanding loans.

The national security loan program was initially envisioned as a way to support big defense contractors through a provision of the $2.2 trillion Cares Act relief package, but there was less demand for the support than expected and most of the backing ended up going to smaller firms and startups.

YRC, one of the largest operators in the less-than-truckload sector in which carriers handle loads for multiple shippers on the same truck, has drawn down $551.3 million, or about 79% of its loan, according to a Jan. 4 report by the Treasury Department. The government agreed to loan the funds in July in exchange for a 29.6% equity stake in the company.

The cash infusion has helped shore up YRC’s debt-troubled finances, allowing the company to pay off millions of dollars in health, pension and other obligations and refresh its aging vehicle fleet.

YRC serves large industrial and retail customers like

Walmart Inc.

and moves an estimated 68% of the Defense Department’s less-than-truckload shipments. The company has struggled in recent years under a heavy debt load, and was trying to turn the business around when the coronavirus pandemic hit.

A bipartisan panel of legislators has questioned the certification process for the YRC loan and pressed the Treasury on how the trucker was able to qualify for government aid despite its precarious financial position before the pandemic. Some other Republican and Democratic lawmakers backed YRC’s loan request, sending letters of support in April to Treasury Secretary

Steven Mnuchin.

The Congressional Oversight Commission said in a Dec. 31 report that many other companies also provide less-than-truckload shipping, and that the Pentagon said it hadn’t asked whether other LTL providers could step in if YRC shut down. The report also said a $400 million tranche of the YRC loan earmarked for the purchase of new trucks and trailers exceeded the scope of the Cares Act funding, as it isn’t being used to address losses stemming from the impact of Covid-19.

YRC’s loan agreement “complies with the Cares Act and all additional requirements established by Treasury,” company spokeswoman

Heather Nauert

said. “The capacity that YRC brings to the supply chain at this time is absolutely crucial to our nation’s economy and pandemic recovery efforts.”

Ms. Nauert said YRC’s armed forces work is a highly specialized service, with trained and credentialed drivers, that allows the company’s trucks to access military facilities quickly and efficiently through a network of more than 300 terminals across the U.S.

“Transporting goods for the federal government is highly complex,” she said. “Not all carriers can do it.”

Defense Department spokeswoman

Jessica Maxwell

said YRC delivers general cargo and hazardous materials, and that the company’s “status as ‘critical to national security’ is a function of its providing these services to DoD; it is not necessary that it be a unique provider of such services.”

The Defense Department used the same criteria when reviewing companies for Treasury loans that it used for Defense Production Act funding awards, Ms. Maxwell said. She said the Treasury Department made the “final determinations and decisions” to grant these loans.

The Treasury Department declined to comment for this article.

Mr. Mnuchin told a Congressional Oversight Commission hearing in December that taxpayers will profit from the loan and that the Treasury made the national security decision based on a recommendation from then-Defense Secretary

Mark Esper.

Although the YRC loan was risky, Mr. Mnuchin said, “It saved lots and lots and lots of jobs.”

Write to Jennifer Smith at jennifer.smith@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 15, 2021, print edition as ‘Trucker YRC Received Bulk of Relief Loans.’



Source link