June 30, 2023

United Road under new ownership in swap of debt for equity


United Road, a major carrier of new and used automobiles, has an unidentified new group of owners. 

The fact that the company is no longer fully owned by The Carlyle Group (NASDAQ: CG) was revealed earlier this month through actions taken by S&P Global Ratings (NYSE: SPGI) and Moody’s (NYSE: MCO)

The two agencies changed the company’s debt rating to a type of default and withdrew their rating on a first-term lien that was restructured. In the restructuring, the outstanding debt was converted into equity in United Road. 

The new, unidentified United Road owners are the earlier holders of the term loan. In its statement, Moody’s said the restructuring covered $335 million in first lien debt that was converted to equity, resulting in the new ownership.  

“Carlyle is no longer the equity owner of United Road,” the company said in a statement released to FreightWaves. “We have new private owners who are enthusiastically supporting the company.” 

The identities of the private owners were not revealed. 

“The message is simple: we have zero outstanding long-term debt obligations, new private owners, a sizeable equity infusion, and a strong balance sheet,” the company said in the statement. “We continue to thrive as the industry leader.”

The Carlyle Group had acquired United Road in 2017. 

The restructuring resulted in less than full payment of the principal. Companies that perform restructurings in which less than 100% of a debt’s principal is repaid are generally hit with a form of default rating from the ratings agencies. 

In the case of S&P Global Ratings, it is referred to as “selective default.” That is the rating on URS Holdco, the legal name of United Road, while the rating on the term loan that was restructured was reduced to D, the lowest grade in the S&P Ratings schedule. The rating on the loan was then withdrawn.

At Moody’s, the company’s Caa1-PD probability of default was appended by a designation of /LD, for “limited default.” Like S&P, given that the term loan was restructured and converted to equity in United Road, the rating was then withdrawn. 

In its announcement of the action, S&P Global said United Road generated about 55% of its revenues in 2021 from moving new vehicles, with the balance moving used vehicles.

In a statement submitted to FreightWaves, United Road Chairman and CEO Mark Anderson said it supported the withdrawal of the ratings by the agencies. “The reason for this is the fact that United Road has zero debt!” 

Both agencies did note that United Road continues to have an asset-backed line of credit.  United Road’s statement that it has zero debt would suggest it has not drawn on that line. 

“We have the strongest balance sheet in our history and supportive, enthusiastic investors supercharging the purchase of new trucks to support our growth, and we will continue to invest in innovative and industry-leading technology solutions,” Anderson said. 

Anderson’s statement did not make reference to the new ownership structure.

Anderson was named chairman in April to go along with his CEO position. The announcement of that promotion was in a letter sent by the outgoing chair, Kathleen McCann, who had led the board since 2013. 

Although a downgrade in United Road’s outlook last fall suggested difficulties at the company, the announcement in 2020 of McCann joining a private equity firm called Nonantum said under her leadership, United Road had gone through “a period of rapid growth beginning in 2011, nearly tripling in size to become the largest provider of vehicle transportation services in North America in 2017.”

In October, S&P Global had affirmed a CCC+ rating for United Road even as it was reducing the company’s outlook to negative. A CCC+ rating put the company about halfway in the sweep of non-investment grade ratings. 

“We expect further delays in the U.S. domestic light vehicle production recovery to contribute to ongoing weak performance for URS,” the S&P Global report from October said. “URS’ financial performance is likely to remain weak over the next 12 months amid subdued new vehicle sales in the U.S.”

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