The news late on Aug. 6 that Yellow Corp. executives have thrown in the towel and will sell the company's equipment and real estate and settle its considerable debts came with a flurry of filings in U.S. Bankruptcy Court for the District of Delaware. In those documents, the nearly 100-year-old company and No. 6 for-hire FleetOwner 500 carrier lays out several poignant details from its final days as well as how Yellow's leaders plan to wind down operations in the coming months.
Many of Yellow's filings include the same language the company has used in public statements to attack the International Brotherhood of Teamsters and its general president, Sean O'Brien, who executives say sabotaged their efforts to further streamline Yellow after it had integrated the western U.S. parts of its network last year. The union has consistently returned fire or initiated invective on its own, especially as Yellow's fortunes started to fall apart in June and July, and the blame game began.
O'Brien, who has in recent weeks called Yellow "a deadbeat company," said CEO Darren Hawkins and his team had badly mismanaged the business, on Aug. 7, contrasting Yellow's fortunes—and its troubled history over several decades—with those of rival trucking companies that have lately negotiated new deals with the Teamsters. In 2011, the union even agreed to a massive pay cut to keep YRC Freight, one of the entities under the Yellow umbrella, in business.
See also: Yellow files for Chapter 11, blasts union
"Yellow management and the financiers who pull the strings continue to blame union contracts for their demise. The fact is, Teamster-represented companies like ABF and TForce Freight (both of which are part of FleetOwner 500 companies) are not only able to fairly compensate workers, they are also wildly profitable," O'Brien said in the Teamsters' Aug. 7 statement after Yellow revealed its Chapter 11 filing late the night before.
"The Teamsters successfully and continuously negotiates strong contracts to preserve the integrity of our members' work and ensure they are justly compensated. More than 15,000 members overwhelmingly ratified powerful new national agreements at both ABF and TForce in just the past two months."
The acrimonious back and forth between the now-shuttered company and its union looks likely to continue in the coming weeks, both in and out of court. In the meantime, here's some new context from the first flurry of Yellow's filings in bankruptcy court in Delaware:
What's happened the past few weeks
- Yellow's shipment volumes plummeted almost as soon as the union on July 17 issued a strike threat that, had it been carried out, would've begun a week later. Former board chairman and now Chief Restructuring Officer Matt Doheny declared in a filing that Yellow handled about 40,000 shipments for customers on July 17 (which already was down about 20% from its 2022 average). "The next day, Yellow's shipments declined to approximately 30,000. By Wednesday: approximately 20,000. By Thursday: approximately 10,000. By Friday: near zero," wrote Doheny, a "special situation" specialist who has been a director since 2011 and had been elected chairman in late 2019. "Any realistic prospect of obtaining out-of-court financing dried up." So had Yellow's chances of some sort of restart with new funding, Doheny wrote: "Yellow's customers are gone." On July 24, the company stopped accepting shipments.
- That rapid deterioration led Yellow's directors to quickly transition Doheny from chairman into the restructuring post-July 19 and trim the company's board to nine members after fellow director Javier Evans—a banker who was elected to the board in November 2021—resigned, effective July 31.
- Yellow executives made the call July 28 to lay off about 3,500 non-union employees, who received severance checks. Two days later, they notified the Teamsters and other unions that their 22,000 member employees also were being laid off.
Where things stand with money, debt, and other physical assets
- For those who watched the eyewatering climb of Yellow's common shares last week on the Nasdaq stock exchange: In a filing with the U.S. Securities and Exchange Commission, Yellow officials said "equity holders could experience a significant or complete loss on their investment" as a result of the Chapter 11 case. There are lots of other creditors ahead of them in line. Yellow shares (Ticker: YELL) were down about 23% to $2.73 on the afternoon of Aug. 7. They had climbed about 63 cents July 28 to a high last week of more than $4.20.
- The company had just $39 million in cash and equivalents as of its Chapter 11 filing. At the end of the first quarter, the last period for which Yellow reported its financials, that figure was $155 million.
- However, Doheny expressed confidence that Yellow's rolling stock and other assets will prove to be worth more than the roughly $1.2 billion in secured debt it needs to pay off. So, there should be money to distribute to other stakeholders, particularly if a motivated buyer surfaces with a good offer. "For the appropriate purchaser, the Debtors' Assets could represent a lucrative opportunity to expand or enter the market, without the overhang of the Debtors' union disputes or other operational difficulties," company officials said in one filing.
- Here's a rundown of the assets that will soon come to market: Yellow's fleet is made up of about 12,700 tractors (about 1,000 of them leased) as well as 42,000 trailers (of which 7,200 are leased). The company also owns 169 service centers around the country with about 10,000 doors and leases another 140 facilities with some 9,100 doors. The company's Yellow Logistics subsidiary also runs six warehouses.
- The company has $846 million in net operating losses that it can keep on its books to help reduce future tax payments—and thus free up more cash to return to creditors. It also has nearly $184 million in so-called carryforwards from business interest expenses it wasn't able to deduct in past years.
- Yellow also has the matter of a controversial $700 million pandemic-era, Trump administration loan from U.S. taxpayers to settle in bankruptcy, and the company pledged in its Aug. 6 statement to do that, saying "we intend to wind down our business, maximize recoveries for creditors, and pay back the CARES Act loan in full,” though there is some debate about whether it can repay that debt.
What's in the works the next few weeks
- The Yellow team has signed debtor-in-possession (DIP) financing agreements with investment firm Apollo Global Management (which owns a lot of Yellow's other debt) that will provide the company with some cash to get it through the Chapter 11 process. The company can access up to $142.5 million, the first $60 million of which would be provided when Judge Craig Goldblatt approves the company's proposal. Later on, another $37.5 million will come Yellow's way when Goldblatt OKs plans outlining the bidding procedures for Yellow's assets. The DIP deal also provides for another $20 million and $25 million to be disbursed once potential buyers have submitted binding bids that would generate $250 million and $450 million, respectively, in cash for Yellow.
- The DIP financing comes at a hefty cost, though: Yellow will be charged an interest rate of 17%. It also will need to pay Apollo a fixed fee of more than $7.1 million as well as another variable fee based on the amount of money outstanding under the facility at various points over the coming weeks.
- Yellow's proposed investment bankers at Ducera Partners—who already have helped scour for DIP lenders—plan to take about three months to market and auction off Yellow's assets. The Ducera team already has reached out to more than 200 entities—both competitors to Yellow and financial buyers—and concluded confidentiality agreements with 63 of those parties under which it made available Yellow data and other materials.
- Potential buyers have until Aug. 18 to formally indicate their interest in some or all of Yellow's assets. From there, Ducera will set about identifying a possible stalking-horse bidder—one that sets the bar for others to clear—by Sept. 30. Formal bids will then be due by Oct. 15 with an auction scheduled for Oct. 18. If all goes to plan, Yellow and Ducera aim to convene a hearing before Goldblatt on Oct. 26 to approve successful bids.
Managing Editor Scott Achelpohl contributed to this report.
