Debt and Financing

Our outstanding debt as of December 31, 2016 and December 31, 2015 consisted of the following:



As of December 31, 2016 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value			Stated Interest Rate			Effective Interest Rate
Term Loan	$	638.5		$	(2.7	)	$	(8.6	)	$	627.2		8.00	%	^(a)	8.20	%
ABL Facility	—			—			—			—			N/A			N/A
Secured Second A&R CDA	28.7			—			(0.6		)	28.1			3.3-18.3%			7.5	%
Unsecured Second A&R CDA	73.2			—			—			73.2			3.3-18.3%			7.5	%
Lease financing obligations	269.9			—			(1.3		)	268.6			9.0-18.2%			12.0	%
Total debt	$	1,010.3		$	(2.7	)	$	(10.5	)	$	997.1
Current maturities of Term Loan	$	(6.7	)	$	—		$	—		$	(6.7	)
Current maturities of lease financing obligations	(10.1		)	—			—			(10.1		)
Long-term debt	$	993.5		$	(2.7	)	$	(10.5	)	$	980.3



As of December 31, 2015 (in millions)	Par Value			Premium/ (Discount)			Debt Issuance Costs			Book Value			Stated Interest Rate			Effective Interest Rate
Term Loan	$	686.0		$	(4.3	)	$	(12.7	)	$	669.0		8.25	%	^(a)	8.45	%
ABL Facility(a)	—			—			—			—			N/A			N/A
Secured Second A&R CDA	44.7			—			(0.3		)	44.4			3.3-18.3%			7.3	%
Unsecured Second A&R CDA	73.2			—			(0.5		)	72.7			3.3-18.3%			7.3	%
Lease financing obligations	278.0			—			(1.7		)	276.3			10.0-18.2%			12.0	%
Total debt	$	1,081.9		$	(4.3	)	$	(15.2	)	$	1,062.4
Current maturities of Term Loan	(7.0		)	—			—			(7.0		)
Current maturities of lease financing obligations	(8.9		)	—			—			(8.9		)
Long-term debt	$	1,066.0		$	(4.3	)	$	(15.2	)	$	1,046.5


(a)	As of December 31, 2016 and 2015, respectively, the stated interest rate represented a variable interest rate of 1, 3 or 6-month LIBOR, with a floor of 1.0% plus a fixed margin ranging from 7.00% to 7.25%.

Credit Facilities

As of December 31, 2016 we had two primary credit facilities that we utilized to support our liquidity needs: a $700 million Term Loan and a $450 million ABL Facility. The ABL Facility is used to support our outstanding letters of credit commitments. We have set forth a brief description of our two primary credit facilities and our other financing arrangements in place at December 31, 2016 below.

$700 Million First Lien Term Loan

On February 13, 2014, we entered into and borrowed in full a $700 million term loan credit agreement (the “Term Loan Agreement”), less a 1% discount, from a syndicate of banks and other financial institutions arranged by Credit Suisse Securities (USA) and Citizens Bank N.A. (formerly known as RBS Citizens, N.A.). No amounts under this Term Loan, once repaid, may be reborrowed. On September 25, 2014, the Company entered into Amendment No. 1 to its Term Loan Agreement, which amended the Term Loan to, among other things, adjust the maximum permitted total leverage ratio through December 31, 2016 and increase the applicable interest rate (subject to the exceptions discussed below) over the same period. On January 31, 2017, the Company entered into Amendment No. 3 to its Term Loan Agreement, which adjusted the maximum permitted total leverage ratio through December 31, 2018 and increased the applicable interest rate, among other things.

The Term Loan requires quarterly principal payments, with remaining amounts outstanding due upon the maturity date of February 13, 2019. Borrowings under the Term Loan can be repaid in whole or in part at any time, without penalty (other than a 1% premium in connection with a repricing transaction within six months of the effective date of Amendment No. 3), subject to required notice periods and compliance with minimum prepayment amounts. As amended, the Term Loan allows for the election of interest at either the applicable LIBOR (subject to a floor of 1.00%), plus a margin of 7.50% or an alternative base rate (as defined in the Term Loan Agreement) plus a margin of 6.50%. The Term Loan provides for an uncommitted incremental facility of up to $250 million, which may be used subject to certain financial covenant requirements and satisfaction of other customary conditions.

The Term Loan is secured by a perfected first priority security interest in (subject to permitted liens) substantially all assets of the Company and certain domestic subsidiaries, other than (a) accounts receivable, cash, deposit accounts and other assets related to accounts receivable, which are subject to a second priority interest (subject to permitted liens), and (b) certain owned real property securing the obligations under the Second A&R CDA (subject to permitted liens) (the “CDA Collateral”).

The Term Loan contains conditions, representations and warranties, events of default, and indemnification provisions that are customary for financings of this type, including, but not limited to, mandatory prepayment obligations, a maximum total leverage ratio covenant, limitations on incurrence of debt, investments, capital expenditures, liens on assets, certain sale and leaseback transactions, transactions with affiliates, mergers, consolidations, purchases and sales of assets, and restricted payments.

The Term Loan Agreement governing our Term Loan has certain financial covenants, as amended on January 31, 2017, that, among other things, restricts certain capital expenditures and requires us to maintain a maximum total leverage ratio (defined as Consolidated Total Debt divided by Consolidated Adjusted EBITDA as defined below).

Our total maximum leverage ratio covenants are as follows:



Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio	Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio
December 31, 2016	3.50 to 1.00	March 31, 2018	3.50 to 1.00
March 31, 2017	3.85 to 1.00	June 30, 2018	3.50 to 1.00
June 30, 2017	3.85 to 1.00	September 30, 2018	3.25 to 1.00
September 30, 2017	3.75 to 1.00	December 31, 2018	3.25 to 1.00
December 31, 2017	3.50 to 1.00

Consolidated Adjusted EBITDA, defined in our Term Loan Agreement as “Consolidated EBITDA,” is a measure that reflects our earnings before interest, taxes, depreciation, and amortization expense, and is further adjusted for, among other things, letter of credit fees, equity-based compensation expense, net gains or losses on property disposals and certain other items, including restructuring professional fees, expenses associated with certain lump sum payments to our union employees and gains or losses from permitted dispositions and discontinued operations. Consolidated Total Debt, as defined in our Term Loan Agreement, is the aggregate principal amount of indebtedness outstanding. Our total leverage ratio for the four quarters ending December 31, 2016 was 3.40 to 1.00.

$450 Million ABL Facility

On February 13, 2014, we entered into our $450 million ABL Facility from a syndicate of banks arranged by Citizens Bank N.A. (formerly known as RBS Citizens, N.A.) (the “ABL Agent”), Merrill Lynch, Pierce, Fenner & Smith and CIT Finance LLC. The ABL Facility terminates on February 13, 2019. YRC Worldwide and our subsidiaries, YRC Freight, Reddaway, Holland and New Penn are borrowers under the ABL Facility, and certain of the Company’s domestic subsidiaries are guarantors thereunder. The ABL Facility matures on February 13, 2019. On June 28, 2016, the Company entered into Amendment No. 2 to the ABL Facility, which extends the maturity from February 13, 2019 to June 28, 2021, so long as 90% of the Term Loan under the Term Loan Agreement is refinanced, replaced or extended with a maturity date of June 28, 2021 or later.

Availability under the ABL Facility is derived by reducing the amount that may be advanced against eligible receivables plus eligible borrowing base cash by certain reserves imposed by the ABL Agent and our outstanding letters of credit and revolving loans. Eligible borrowing base cash is cash that is deposited from time to time into a segregated restricted account and is included in “Restricted amounts held in escrow” in the accompanying consolidated balance sheet. The ABL Facility provides for a $100 million uncommitted accordion to increase the revolving commitment in the future. For the years ended December 31, 2016 and 2015, we had $357.2 million and $362.0 million of outstanding letters of credit, respectively, and no outstanding loans.

At our option, borrowings under the ABL Facility bear interest at either: (i) the applicable LIBOR rate plus 1.75%, as amended, or (ii) the base rate (as defined in the ABL Facility) plus 0.75%, as amended.

Letter of credit fees equal to the applicable LIBOR margin in effect (1.75% as amended, formerly ranging from 2.00% to 2.50%) are charged quarterly in arrears on the average daily stated amount of all letters of credit outstanding during the quarter. Unused line fees are charged quarterly in arrears (such unused line fee percentage is equal to 0.375% per annum if the average revolver usage is less than 50% or 0.25% per annum if the average revolver usage is greater than 50%.)

The ABL Facility is secured by a perfected first priority security interest (subject to permitted liens) in accounts receivable, cash, deposit accounts and other assets related to accounts receivable of the Company and the other loan parties and an additional second priority security interest (subject to permitted liens) in substantially all remaining assets of the borrowers and the guarantors other than the CDA Collateral.

The ABL Facility contains conditions, representations and warranties, events of default and indemnification provisions that are customary for financings of this type, including, but not limited to, a springing minimum fixed charge coverage ratio covenant, borrowing base reporting, limitations on incurrence of debt, investments, capital expenditures, liens on assets, certain sale and leaseback transactions, transactions with affiliates, mergers, consolidations, purchases and sales of assets, and restricted payments. Certain provisions relating to investments, restricted payments and capital expenditures are relaxed upon meeting specified payment conditions or debt repayment conditions.

Second Amended and Restated Contribution Deferral Agreement

Certain of our subsidiaries are parties to the Amended and Restated Contribution Deferral Agreement (the “A&R CDA”), which was further amended and restated effective January 31, 2014 (the “Second A&R CDA”), with certain multiemployer pension funds named therein (collectively, the “Funds”) pursuant to which we are permitted to continue to defer pension payments and deferred interest owed to such Funds as of July 22, 2011 (each, “Deferred Pension Payments” and “Deferred Interest”). There is no mandatory amortization prior to that time. The Deferred Pension Payments and Deferred Interest (each as defined in the A&R CDA) bear interest at a rate as set forth in the Second A&R CDA. The Second A&R CDA, among other things, extended the maturity of deferred pension payments and deferred interest from March 31, 2015 to December 31, 2019. Under the Second A&R CDA, the Funds maintained their first lien on existing first priority collateral.

Pursuant to the terms of the collective bargaining agreement with the IBT, the Company’s subsidiaries began making contributions to the Funds for the month beginning June 1, 2011 at the rate of 25% of the contribution rate in effect on July 1, 2009. However, legislative changes to current law or other satisfactory action or arrangements are required to enable certain of the Funds (based on their funded status) to accept contributions at a reduced rate.

The obligations under the Second A&R CDA are secured by a perfected first priority security interest in the CDA Collateral.

2014 Financing Transaction

On January 31, 2014, we issued 14,333,334 shares of our Common Stock and 583,334 shares of our Class A Preferred Stock pursuant to certain stock purchase agreements, dated as of December 22, 2013 (the “Stock Purchase Agreements”), for an aggregate $250.0 million in cash. We used the proceeds from these transactions to, among other things, (i) deposit with the trustee funds sufficient to repay our 6% Notes at their maturity on February 15, 2014 and (ii) repurchase approximately $90.9 million of our Series A Notes. In February 2014, the Company deposited approximately $89.6 million with the trustee to fund the redemption (including accrued interest), and thereby discharged the indenture governing the Series A Notes. The Company used the cash deposited with the trustee to redeem its Series A Notes on August 5, 2014.

Also on January 31, 2014, certain holders of our Series B Notes exchanged their outstanding balances (including the make-whole premium and additional accrued interest through January 15, 2014) at a price of $15.00 per share, while certain other holders converted their Series B Notes to our common stock in accordance with their terms. We also amended the indenture governing our Series B Notes to eliminate substantially all of the restrictive covenants, certain events of default and other related provisions contained in the indenture and to release and discharge the liens on the collateral securing the Series B Notes.

Effective January 31, 2014, certain of our subsidiaries, various pension funds party thereto, and Wilmington Trust Company, as agent for such pension funds, entered into the Second A&R CDA, which, among other things (i) amended and restated the A&R CDA, (ii) released the agent’s security interest in third priority collateral on the Collateral Release Date (as defined therein), (iii) limited the value of obligations secured by the collateral to the Secured Obligations (as defined therein) and (iv) extended the maturity of deferred pension payments and deferred interest from March 31, 2015 to December 31, 2019.

On February 13, 2014, we replaced our existing credit facilities with a new $450 million ABL Facility and a new $700 million Term Loan, as more fully described above.

We refer to transactions described above collectively as the “2014 Financing Transactions.” The table below summarizes the cash flow activity for the 2014 Financing Transactions:



Cash Sources (in millions)			Cash Uses (in millions)
Term Loan	$	700.0	Extinguish Prior ABL Facility (includes accrued interest)	$	326.0
Proceeds from sale of common stock	215.0		Extinguish Prior Term Loan (includes accrued interest)	299.7
Proceeds from sale of preferred stock	35.0		Retire 6% Notes	71.5
Cash proceeds from restricted amounts held in escrow - existing ABL facility	90.0		Repurchase Series A Notes (upon transaction closing and includes accrued interest)	93.9
ABL Facility	—		Redeem Series A Notes (on August 5, 2014 and includes accrued interest)	89.6
			Fees, Expenses and Original Issuance Discount	50.8
			Restricted Cash to Balance Sheet^(a)	92.0
			Cash to Balance Sheet	16.5
Total sources	$	1,040.0	Total uses	$	1,040.0


(a)	Under the terms of the ABL Facility, this amount was classified as “restricted amounts held in escrow” in the consolidated balance sheet at the closing date of the ABL Facility.

The table below summarizes the non-cash activity for the 2014 Financing Transactions:



Non-Cash Sources (in millions)			Non-Cash Uses (in millions)
Secured Second A&R CDA	$	51.0	A&R CDA	$	124.2
Unsecured Second A&R CDA	73.2		Exchange/conversion of Series B Notes to common stock	50.6
Exchange/conversion of Series B Notes to common stock	50.6
Total sources	$	174.8	Total uses	$	174.8

We accounted for the A&R CDA maturity extension as a debt modification and the remaining transactions as extinguishment of debt and issuance of new debt. We recorded a gain on extinguishment of debt of $11.2 million associated with this transaction during the year ended December 31, 2014, $16.3 million of which related to the acceleration of net premiums on our old debt, partially offset by $5.1 million of additional expense related to the fair value of the incremental shares provided to those Series B Note holders who exchanged their outstanding balances at a price of $15.00 per share. We recorded, in “interest expense” on the statements of consolidated comprehensive income (loss), $8.0 million of make-whole interest related to the Series B Notes exchanged during the year ended December 31, 2014. We paid $43.8 million of fees associated with these transactions of which $26.7 million was recorded as unamortized deferred debt costs in “other assets” in the consolidated balance sheet and will be recognized as interest expense over the term of the Term Loan and ABL Facility and $17.1 million offset the equity proceeds of our stock purchase agreements.

On March 14, 2014, the Company held a special meeting of stockholders at which our stockholders approved amending our Certificate of Incorporation to increase the number of authorized shares of Common Stock to 95.0 million shares and to allow an investor involved in the 2014 Financing Transactions to own more than 19.99% of outstanding Common Stock. Upon approval of these amendments, each outstanding share of Convertible Preferred Stock automatically converted into four shares of Common Stock and the Company recorded $18.1 million related to the amortization of the beneficial conversion feature on preferred stock on the statements of consolidated operations.

Series B Convertible Senior Secured Notes

On July 22, 2011, we issued $100.0 million in aggregate principal of our Series B Notes that bore interest at a stated rate of 10.0% per year and matured on March 31, 2015. Interest was payable on a semiannual basis in arrears only in-kind through the issuance of additional Series B Notes.

On March 25, 2015, we entered into an exchange agreement with certain holders of our Series B Notes to exchange their outstanding principal and accrued interest balances totaling $17.9 million at conversion price of $18.00 per share for an aggregate 994,689 shares of Common Stock. During the year ended December 31, 2015, we recorded $0.6 million of additional expense related to the fair value of the incremental shares provide to those holders who exchanged their outstanding balances. At maturity on March 31, 2015, we repaid the holders of the remaining outstanding Series B Notes approximately $0.3 million of cash.

As discussed in the “2014 Financing Transaction” section, on January 31, 2014, certain holders of our Series B Notes exchanged their outstanding balances as part of an exchange agreement. Not including the exchanges made as part of our 2014 Financing Transactions, during the year ended December 31, 2014, $1.2 million of aggregate principal amount of Series B Notes converted into 75,900 shares of our common stock. Upon conversion, we recorded $0.4 million of additional interest expense representing the $0.2 million make whole premium and $0.2 million of accelerated amortization of the discount on Series B Notes converted.

Maturities

The principal maturities over the next five years and thereafter of total debt as of December 31, 2016 was as follows:



(in millions)	Term Loan		ABL Facility		Second A&R CDA		Lease Financing Obligations^(a)		Total
2017	$	6.7	$	—	$	—	$	10.1	$	16.8
2018	6.7		—		—		11.8		18.5
2019	625.1		—		101.9		6.6		733.6
2020	—		—		—		4.2		4.2
2021	—		—		—		3.2		3.2
Thereafter	—		—		—		234.0		234.0
Total	$	638.5	$	—	$	101.9	$	269.9	$	1,010.3


(a)	Lease financing obligations subsequent to 2021 of $234.0 million represent principal cash obligations of $11.2 million and the estimated net book value of the underlying assets at the expiration of their associated lease agreements of $222.8 million.

Fair Value Measurement

The book value and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:



	December 31, 2016				December 31, 2015
(in millions)	Book Value		Fair Value		Book Value		Fair Value
Term Loan	$	627.2	$	638.1	$	669.0	$	594.6
ABL Facility	—		—		—		—
Lease financing obligations	268.6		259.1		276.3		282.9
Secured and Unsecured A&R CDA	101.3		101.8		117.1		102.1
Total debt	$	997.1	$	999.0	$	1,062.4	$	979.6

The fair values of the Term Loan and Secured and Unsecured A&R CDA were estimated based on observable prices (level two inputs for fair value measurements). The fair value of the lease financing obligations is estimated using a publicly traded secured loan with similar characteristics (level three input for fair value measurement).

Liquidity

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our ABL Facility and any prospective net cash flow from operations. As of December 31, 2016, our availability under our ABL Facility was $89.0 million, which is derived by reducing the amount that may be advanced against eligible receivables plus eligible borrowing base cash by certain reserves imposed by the ABL Agent and our $357.2 million of outstanding letters of credit. Of the $89.0 million in availability, we do not expect to access more than $44.4 million (“Managed Accessibility”) based on our springing fixed charge coverage ratio (as set forth in our ABL Facility). Our cash and cash equivalents and Managed Accessibility was $181.1 million as of December 31, 2016.

As of December 31, 2015, our availability under our ABL Facility was $79.7 million. Of the $79.7 million in availability, Managed Accessibility was $35.5 million. Our cash and cash equivalents and Managed Accessibility was $209.3 million as of December 31, 2015.

Outside of funding normal operations, our principal uses of cash include making contributions to our single-employer pension plans and various multi-employer pension funds, and meeting our other cash obligations, including, but not limited to, paying principal and interest on our funded debt, payments on equipment leases and funding capital expenditures.

Capital Expenditures/Operating Leases

Our capital expenditures for the years ended December 31, 2016 and 2015 were $100.6 million and $108.0 million, respectively. These amounts were principally used to fund the purchase of used tractors and trailers, refurbish engines for our revenue fleet, purchase in-cab safety technology and for capitalized costs to improve our technology infrastructure.

For the year ended December 31, 2016, we entered into new operating lease commitments for revenue equipment totaling $126.4 million, with such payments to be made over the average lease term of 5 years. As of December 31, 2016, our operating lease obligations for 2017 are $107.4 million and our total operating lease obligations through 2030 total $334.7 million and are expected to increase as we lease additional revenue equipment in future years.