Debt and Financing

Our outstanding debt as of December 31, 2018 and December 31, 2017 consisted of the following:



As of December 31, 2018 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value				Effective Interest Rate
Term Loan	$	573.7		$	(7.8	)	$	(6.5	)	$	559.4		^(a)	11.4	%
ABL Facility	—			—			—			—
Secured Second A&R CDA	26.9			—			(0.1		)	26.8				7.9	%
Unsecured Second A&R CDA	46.7			—			(0.2		)	46.5				7.9	%
Lease financing obligations	242.7			—			(0.5		)	242.2				14.9	%
Total debt	$	890.0		$	(7.8	)	$	(7.3	)	$	874.9
Current maturities of Term Loan	(14.2		)	—			—			(14.2		)
Current maturities of Unsecured Second A&R CDA	(1.5		)	—			—			(1.5		)
Current maturities of lease financing obligations	(5.0		)	—			—			(5.0		)
Long-term debt	$	869.3		$	(7.8	)	$	(7.3	)	$	854.2



As of December 31, 2017 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value				Effective Interest Rate
Term Loan	$	595.5		$	(10.4	)	$	(8.3	)	$	576.8		^(a)	10.5	%
ABL Facility^(a)	—			—			—			—				N/A
Secured Second A&R CDA	26.9			—			(0.1		)	26.8				7.8	%
Unsecured Second A&R CDA	48.2			—			(0.3		)	47.9				7.8	%
Lease financing obligations	255.5			—			(0.9		)	254.6				12.1	%
Total debt	$	926.1		$	(10.4	)	$	(9.6	)	$	906.1
Current maturities of Term Loan	(18.0		)	—			—			(18.0		)
Current maturities of Unsecured Second A&R CDA	(1.5		)	—			—			(1.5		)
Current maturities of lease financing obligations	(11.1		)	—			—			(11.1		)
Long-term debt	$	895.5		$	(10.4	)	$	(9.6	)	$	875.5


(a)	As of December 31, 2018 and 2017, 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 of 8.50%.

Credit Facilities

As of December 31, 2018, we had two primary credit facilities that we utilized to support our liquidity needs: a $600 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, 2018 below.

$600 Million First Lien Term Loan

On July 26, 2017, the Company entered into Amendment No. 4 (the “Amendment”) to the credit agreement (the “Term Loan Agreement”) governing our term loan facility (the “Term Loan”), 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.) which extended the maturity date to July 26, 2022 and required a $35.2 million payment to bring the balance to $600 million. No amounts under this Term Loan, once repaid, may be reborrowed.

The Term Loan requires quarterly principal payments, with remaining amounts outstanding due upon the maturity date of July 26, 2022. Borrowings under the Term Loan can be repaid in whole or in part at any time, without penalty, 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 8.50% 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. In connection with the Amendment, the Company paid $35.2 million in principal and incurred $9.7 million in original issuance discount and $9.7 million in transaction costs for third party fees.

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 (subject to permitted liens) (the “CDA Collateral”) securing the obligations under the Second A&R CDA as defined and discussed below.

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 July 26, 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, 2018	3.50 to 1.00	June 30, 2020	3.00 to 1.00
March 31, 2019	3.25 to 1.00	September 30, 2020	2.75 to 1.00
June 30, 2019	3.25 to 1.00	December 31, 2020	2.75 to 1.00
September 30, 2019	3.25 to 1.00	March 31, 2021	2.75 to 1.00
December 31, 2019	3.00 to 1.00	June 30, 2021 and thereafter	2.50 to 1.00
March 31, 2020	3.00 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 certain property disposals, restructuring professional fees and other transaction costs related to issuances of debt, non-recurring consulting 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, 2018 was 2.64 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 was amended on June 28, 2016 to extend the maturity date to June 28, 2021. 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.

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, 2018 and 2017, we had $341.3 million and $352.6 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, 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

Pursuant to the terms of the collective bargaining agreement with the IBT, the Company’s subsidiaries began making contributions to the Funds (defined below) for the month beginning June 1, 2011 at the rate of 25% of the contribution rate in effect on July 1, 2009. 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”). The Deferred Pension Payments and Deferred Interest (each as defined in the A&R CDA) bear interest at a floating 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 secured first priority collateral.

On January 30, 2018, the Company entered into Amendment No. 1 (the “First Amendment to the CDA”) to the Second A&R CDA with the Trustees for the Central States, Southeast and Southwest Areas Pension Fund, certain pension funds party thereto, and Wilmington Trust Company, as agent (the “CDA”).

The First Amendment to the CDA, among other things: (a) extends the final maturity date of obligations under the CDA to December 31, 2022 and (b) provides for annual scheduled amortization equal to 2.0% of the amount outstanding as of November 30 of each applicable year.

Additionally, pursuant to the First Amendment to the CDA, a one-time payment of $25.0 million was made in December 2017 to Wilmington Trust Company, as agent under the CDA.

Maturities

The principal maturities over the next five years and thereafter of total debt as of December 31, 2018 was as follows:



(in millions)	Term Loan		ABL Facility		Second A&R CDA		Lease Financing Obligations^(a)		Total
2019	$	14.2	$	—	$	1.5	$	5.1	$	20.8
2020	18.0		—		1.4		3.6		23.0
2021	18.0		—		1.4		3.4		22.8
2022	523.5		—		69.3		4.3		597.1
2023	—		—		—		5.1		5.1
Thereafter	—		—		—		221.2		221.2
Total	$	573.7	$	—	$	73.6	$	242.7	$	890.0


(a)	Lease financing obligations subsequent to 2023 of $221.2 million represent principal cash obligations of $17.1 million and the estimated net book value of the underlying assets at the expiration of their associated lease agreements of $204.1 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, 2018				December 31, 2017
(in millions)	Book Value		Fair Value		Book Value		Fair Value
Term Loan	$	559.4	$	546.0	$	576.8	$	596.9
ABL Facility	—		—		—		—
Lease financing obligations	242.2		234.7		254.6		257.7
Second A&R CDA	73.3		70.0		74.7		75.3
Total debt	$	874.9	$	850.7	$	906.1	$	929.9

The fair values of the Term Loan and Second 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, 2018, our maximum availability under our ABL Facility was $39.2 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 $341.3 million of outstanding letters of credit. Our Managed Accessibility was $1.2 million, which is the measure of availability management represents is the maximum amount we would access on the ABL Facility and is adjusted for eligible receivables plus eligible borrowing base cash measured as of December 31, 2018. If eligible receivables fall below the threshold management uses to measure availability, which is 10% of the borrowing line, the Credit Agreement governing the ABL Facility permits adjustments from eligible borrowing base based on the ABL requirement to maintain availability equal to or above 10% of the borrowing line. For the December 31, 2018 measured borrowing base certificate, which was filed in January 2019, we had less than 10% of the borrowing line in eligible receivables and moved $25.0 million of cash into restricted cash, as permitted under the ABL Facility, which effectively put our cash and cash equivalents and Managed Accessibility to $203.8 million as of December 31, 2018.

As of December 31, 2017, our availability under our ABL Facility was $68.9 million. Of the $68.9 million in availability, Managed Accessibility was $26.7 million. Our cash and cash equivalents and Managed Accessibility was $118.3 million as of December 31, 2017.

The table below summarizes cash and cash equivalents and Managed Accessibility for the years ended December 31:



(in millions)	2018			2017
Cash and cash equivalents	227.6			91.6
Less: amounts placed into restricted cash subsequent to year-end	(25.0		)	—
Managed Accessibility	1.2			26.7
Total cash and cash equivalents and Managed Accessibility	$	203.8		$	118.3

Outside of funding normal operations, our principal uses of cash include making contributions to our various multi-employer pension funds and single-employer pension plans, 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, 2018 and 2017 were $145.4 million and $103.3 million, respectively. These amounts were principally used to fund the purchase of used tractors and trailers, refurbish engines for our revenue fleet, and for capitalized costs to improve our technology infrastructure.

For the year ended December 31, 2018, we entered into new operating lease commitments for revenue equipment totaling $198.5 million, with such payments to be made over the average lease term of 4 years. As of December 31, 2018, our operating lease obligations for 2019 are $138.4 million and our operating lease obligations through 2030 total $429.2 million and are expected to increase as we lease additional revenue equipment in future years.