Tuesday, October 11, 2011

Carlyle Loads Up on YRC

Seeking Alpha reported:

YRC Worldwide Inc. (YRCW) is an international provider of asset and non-asset based transportation services across the U.S., Puerto Rico, Canada, Guam and Mexico. DC-based The Carlyle Group, with over $150 billion in assets under management diversified over 84 distinct funds, filed Form SC 13G with the SEC on Thursday, indicating that one of their funds, DBD Cayman Holdings, holds 292.8 million shares or 14.1% of YRCW stock, a new position since the company last filed their quarter 13F with the SEC for the period ending June 2011.
Carlyle's YRCW holdings are direct shares and indirect stock holdings via convertible bonds.  Nearly 293 million shares come from 128.9 million shares of stock + 163.9 million convertible from debt.  Unmentioned are another 93.2 million shares convertible in July 2013.

YRC isn't Carlyle's first venture into the transportation arena.  Carlyle purchased CSX Lines, converting the company into Horizon Lines.  They monetized Horizon after 18 months for a quick double.   Carlyle also owned intermodal facilities operator ITS.  It lost out on Inchscape and withdrew from Galveston's port privatization.

DBD Cayman's holdings (prior to the YRC stock/convertible bond purchase) stood at $9 billion.  Roughly $450 million or 5% of DBD's holdings are U.S. banks, most of which received TARP funds.  BankUnited got over $2 billion in cash subsidy from the FDIC.  Given Carlyle's love for Uncle Sam's wallet, it's no surprise YRC Worldwide has a Government Solutions division.  They don't break out government revenue, instead lumping it into National or Regional shipment revenues. 

Carlyle could always read Uncle Sam's tea leaves.  It helps to have a former White House lawyer as a co-founder and huge government consultant Booz Allen Hamilton as an affiliate.  What does David Rubenstein know that makes YRC ripe for 30% or greater annual returns?