Swift CEO Restructures Debt To Reduce Risk In Case Of Falling Share Prices

Swift CEO Jerry Moyes Stepping Down

As Swift Transportation’s stock price falls, the company’s CEO is taking action, restructuring debt in order to reduce his risk.

$600 Million In Swift Stock Could End Up In Hands Of Creditors

For some time now, Swift Transportation CEO Jerry Moyes has been criticized for using his family’s shares in the trucking company to fund personal business ventures. Currently, about 75% of the Moyes family shares are pledged towards the family’s personal debt and financial obligations. These pledged shares are worth a reported $600 million. If Moyes defaults on his loans, his shares could end up in the hands of his creditors.

NHL Could Seize Millions In Swift Shares

Notably, Swift shares have been pledged to the National Hockey League for expenses incurred after the league sued Moyes in 2010. The lawsuit came about after the Moyes co-owned Phoenix Coyotes went bankrupt. According to a Wall Street Journal report, the NHL could seize about $34 million worth of Swift stock if Moyes fails to make a payment.

CEO Restructured Debt To Reduce Risk To Self, Company

Earlier this month, Moyes restructured his debt by borrowing $91.9 million from Citigroup Inc. in exchange for promising to deliver $7 million in either cash or Swift shares at a future date. That money was used to pay down about half of the Moyes’ margin loans. Many see this as a move designed to reduce Moyes’ personal exposure since margin loans allow his lenders to demand additional Swift shares if the value of the shares falls.

The move did not reduce Moyes’ overall debt, though it did change the type of debt.

Swift stock is down 40% from last year. On Monday, it reached it’s lowest point since January.

Teamsters Urge Shareholders To Reduce Moyes Family’s Power

The International Brotherhood of Teamsters owns a small percentage of Swift shareholdings. They have urged other shareholders to help them get rid of the board’s voting structure which gives the Moyes family the majority of the votes.

Swift’s annual shareholders’s meeting is taking place today in Phoenix.

Sources:
The Wall Street Journal