YRC Worldwide Inc.'s chief restructuring officer, John A. Lamar, may have the most difficult job at the financially troubled less-than-truckload (LTL) carrier. But he appears to be getting well paid for the challenge.
Lamar, 69, is being compensated $80,000 a month by YRC for a 12-month stint as "chief restructuring officer," according to a Nov. 8, 2010, letter sent to Lamar by James Kissinger, YRC's executive vice president, human resources. The compensation period began on Nov. 8.
In addition, Lamar is eligible for a $500,000 "success fee" based on what the letter called the "achievement of specific objectives and business results" as determined by YRC's board. Any fee would be paid at the end of Lamar's stint.
Lamar, who serves as YRC's lead independent director, would also receive what the letter termed "director compensation." The letter was included in the company's annual 10-K filing on March 14 with the Securities and Exchange Commission.
Graef "Bud" Crystal, one of the nation's leading experts on executive compensation, said that in a circumstance such as YRC's, no set formula exists to determine if Lamar's compensation is excessive or in line with industry standards. "In these sorts of "work-out" situations, I don't believe there is a metric that can be applied, other than your nose," Crystal said in an e-mail.
Besides his role at YRC, Lamar is chairman of Premier Truck Leasing, a trailer-leasing firm based in Grapevine, Texas. He is also chairman of BeefTek LLC.
Bumpy road ahead
Based on events of the past 72 hours, Lamar has his work cut out for him. In its SEC filing, YRC disclosed that its multi-employer pension funds missed a March 10 deadline to sign on to the company's Feb. 28 proposed restructuring plan. The problem arose after YRC's lenders refused to agree to terms proposed by the company's pension plans to raise interest rates on YRC's deferred pension contributions.
The inaction triggered a "milestone failure" that allows YRC's lenders to declare the company in default of its credit agreements, the company said in its filing. As a result, YRC would owe $5 million if a definitive agreement is not reached by April 29. The company hopes to complete its restructuring plan no later than July 22.
"The required lenders have not indicated that they intend to declare an event of default under the credit agreement, and we are continuing to work with the parties," YRC said in its filing. "We cannot provide any assurance that the required lenders will not declare an event of default under the credit agreement. If the required lenders declare an event of default under the credit agreement, we anticipate that we would seek protection under the U.S. Bankruptcy Code."
The Feb. 28 agreement would provide the company with an undetermined amount of new capital and swap some of its debt for equity. Analysts believe the tentative agreement satisfies the Teamsters' requirement for $300 million in additional capital called for under the company's latest labor contract, which was ratified by the rank and file in October.
As part of the agreement, the company will follow through on its pledge to reinstate pension contributions on June 1, 2011, at a rate of 25 percent of its prior contribution rate. In addition, the Teamsters will get two seats on YRC's board.
In a March 15 e-mail to the company's top executives and sales, marketing, and support teams, Chief Marketing Officer Greg Reid said the prior day's filing includes "cautionary language" that reflects the problems YRC faced in 2010, the "uncertainties" posed by the current industry operating environment, and the pending completion of its restructuring.
Reid added that "it is necessary for our ... disclosures to present extensive discussion on all factors related to our restructuring—including milestones and potential consequences, and other risks."
Jon A. Langenfeld, transport analyst for Milwaukee-based Robert W. Baird & Co., said in a March 15 note to clients that the risk of a YRC bankruptcy filing is no greater today than it was two weeks ago. Given that YRC has been granted 20 so-called amendments—or concessions—to its credit agreements in the past three years, investors would normally expect further concessions to keep the company going, Langenfeld said.
However, the perception of YRC's inability to continue as a "going concern" is enough to unsettle those with a stake in the company, Langenfeld said.
Equity investors appeared to be bothered by the news, sending the stock down nearly 29 percent as of 3 p.m. EST March 16. YRC stock was trading at $1.47, a new 52-week low.
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