The U.S. Treasury department just announced that they will be giving YRC Worldwide a $700 million bailout thanks to funds from the CARES Act. Darren Hawkins sits on the White House Great American Economic Revival task force. He is also the CEO of YRC Worldwide.
YRC is one of the nation’s largest LTL carriers. They employ around 30,000 people. One of their most important clients is the U.S. Department of Defense. According to the Treasury Department, YRC provides 68% of all LTL services for the DOD.
That’s a large percentage, especially given that less than two years ago the federal government sued YRC, claiming that they had “knowingly” and “systematically overcharged” the DOD for their services. The Justice Department called the alleged fraud “an affront to American taxpayers” and claimed that YRC executives “made false statements to the government that hid their misconduct.”
That wasn’t YRC’s only problem however. The company had been in dire financial straits, with hundreds of millions of dollars in debt. They borrowed $400 million in 2011, $300 million in 2014, and just this past September borrowed another $600 million. And all of this for a company with a market cap south of $100 million.
While YRC’s business outlook hasn’t seemed to improve much since then, the world of politics has served the company well. Kansas Senator Jerry Moran (where YRCW is headquartered) asked Secretary Mnuchin about what the Treasury Department could do specifically to help YRCW in a senate hearing last week.
On top of that, the current CEO and one former CEO of YRC have both reached positions of influence in the federal government. Hawkins got a place on the coronavirus revival task force. Bill Zollars, Former YRC Chairman/President/CEO was nominated to serve as one of the board of governors for the United States Postal Service. He was confirmed by the US Senate on June 19th, 2020. Twelve days later, YRC’s $700 million loan was announced.
On news of the bailout, YRC’s stock price more than doubled.
As of now, YRC has $880 million in debt. They’re operating at a loss thanks to the debt, an aging fleet, high union membership levels, and high executive pay. In 2018, Hawkins brought home $4,425,681 in total compensation – including a $2,208,750 bonus.
The U.S. Department of the Treasury will receive a nearly 30% stake in the company as part of the loan terms. U.S. Treasury Secretary Steven Mnuchin called this “appropriate compensation to taxpayers.” But taxpayers are out $700 million now with no guarantee that the loan will be sufficient to save YRC.