Controversial trucking company YRC Worldwide has been given a $700 million loan by the U.S. Treasury Department.
In a statement, the company said it was being given the loan under the CARES Act after it was significantly impacted by the COVID-19 pandemic. The Treasury Department said the loan was justified because YRC provides a large portion of the less-than-truckload services used by the U.S. military.
“Treasury’s determination was based on a certification by the Secretary of Defense that YRC is critical to maintaining national security,” the Treasury Department said in a statement.
YRC said it provides 68% of less-than-truckload services to the Department of Defense. The company said it is the second largest less-than-truckload company in the United Stated and, along with its operating companies, employs 30,000 people, including 24,000 teamsters.
In May, YRC said there was “substantial doubt” it could stay in business without federal help or a “meaningful stabilization” of the economy. In June, it said per-day shipments were down 20% during the quarter.
Under the terms of the loan, the Treasury Department will receive a 29.6% fully diluted equity ownership in the company. YRCW will receive the loan in two $350 million tranches.
In 2018, the Department of Defense sued YRC alleging it overcharged the government, violated contract terms, and failed to comply with procurement rules. In the civil lawsuit, the Defense Department alleged YRC “reweighed thousands of shipments and suppressed the results whenever they indicated that a shipment was actually lighter than its original estimated weight.”
YRC has said it will vigorously defend itself and a motion to dismiss the case has been pending for ten months. “There has been no impact on the Department of Defense relationship,” the company said.
YRC’s stock has fallen 85% in the last five years and 27% this year. It was worth $70 million as of the close of market Tuesday.
YRC’s years of financial turmoil were covered in a CFO web series, “Anatomy of a Turnaround,” in 2015.