Treasury just lent a troubled trucking company $700 million. The company was worth only $70 million

That’s an enormous sum for a company whose stock had plunged 27% this year and was worth only $70 million as of Tuesday’s close.

Long-term competitive problems had taken the company’s stock down 85% over the last five years. But shares of YRC (YRCW) more than doubled in value in pre-market trading on the news of the bailout.

US taxpayers will end up owning 30% of the company’s stock as part of the loan agreement.

The loan is not part of the federal CARES Act meant to help small businesses. Instead, it is meant to provide help to businesses critical to national security. Treasury’s statement said the loan was justified by the fact that the company provides a majority of the trucking services moving pallet-sized shipments of freight for the US military, a segment of the industry known as “less-than-truckload” or LTL.

“Treasury’s determination was based on a certification by the Secretary of Defense that YRC is critical to maintaining national security,” said Treasury in its statement.

YRC warned in May that there was “substantial doubt” about its ability to stay in business without either federal help or a “meaningful stabilization of the economy in the near term.” On June 9, YRC warned that its per-day shipments were down 20% in the quarter, and the rates it was receiving per pound of freight moved were down 6%, compared to a year earlier.

The company has 30,000 employees, of whom 24,000 are represented by the Teamsters union. About half the loan money will be used to cover short-term contractual obligations, including pension and healthcare benefits. The loan will be due in 2024.

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The Teamster-represented companies once dominated the trucking industry, especially the LTL sector. But with higher labor costs they have lost market share continually over the course of recent decades. It has posted a profit in only three of the last 13 years, and it lost more than $3 billion in total during that period.

YRC was formed through the merger of several of those unionized carriers, including Yellow Freight and Roadway, in 2003. It operates under the brands Holland, New Penn, Reddaway, and YRC Freight.

“Our 30,000 employees have continued to serve hundreds of quarantined communities across the country during the pandemic and this financial assistance will enable us to bridge this pandemic-related crisis and continue to provide essential shipping services for the nation’s supply chain,” said CEO Darren Hawkins in a statement about the loan.

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