Yellow Corp. has received an offer from rival less-than-truckload giant Estes Express Lines that would fund its short-term efforts to wind down its operations via Chapter 11 bankruptcy proceedings. An attorney for Nashville-based Yellow, which was No. 6 on the 2023 for-hire FleetOwner 500, said on Aug. 11 that the Estes Express "financing proposal [had] continued to gel" late last week.
Richmond, Virginia-based Estes Express (No. 11 on the for-hire FleetOwner 500) surfaced earlier last week as a possible source of so-called debtor-in-possession (DIP) funding for Yellow, which filed for protection from its creditors on Aug. 6 and is looking to sell off its equipment and real estate in the next two months. Yellow has an estimated $1.5 billion in debt, but its assets to sell are substantial: 12,700 tractors (about 1,000 of them leased) as well as 42,000 trailers (of which 7,200 are leased), 169 terminals, and six warehouses run by its Yellow Logistics subsidiary. And the entry of rival Estes Express as a financial backer has introduced complications and interest in the fate of Yellow's holdings.
See also: Fleet failures playing role in fueling used-truck market surge
Yellow executives and their attorneys have said since filing Chapter 11 papers that they expect those asset auctions to generate more than enough money to repay the company's loans and other obligations, but they have said they need the DIP financing in the meantime to pay certain bills and other expenses. The company's debts include the $700 million pandemic-era loan Yellow's leaders accepted from the Trump administration; executives promised to repay the debt, which gave U.S. taxpayers a 30% stake in the company, but legal experts are skeptical.
The defunct trucking company has an outstanding $137 million lawsuit in U.S. District Court in Kansas against its union, the International Brotherhood of Teamsters (IBT). Yellow blames the IBT for scuttling the rest of its One Yellow financial restructuring, its third in 15 years, driving it out of business, and sending the LTL into bankruptcy court. The union denies this, saying Yellow's C-suite "pin their corporate incompetence on working people."
The Teamsters represent about 22,000 of Yellow's 30,000 now-former employees. The union is continuing to work on providing them with transition assistance.
Palace intrigue about who will pay the rest of the way for Yellow
Shortly after filing for bankruptcy, Yellow said that Apollo Global Management, the investing giant that owns much of Yellow's term debt, offered to provide DIP financing at a 17% interest rate. On Aug. 11, however, attorney Patrick Nash told Judge Craig T. Goldblatt of the U.S. Bankruptcy Court in Delaware of the progress in talks between Yellow and Estes Express, which itself is home to more than 32,000 employees, to provide cash at a lower interest rate and added that investment firm MFN Partners Management—which this summer quickly built a 42% stake in Yellow—also has said it would be willing to provide DIP funding. In addition, Nash said, other entities had indicated an interest in funding Yellow in the short term.
"As I stand here today," Nash said during a hearing, "I have optimism" that DIP financing could soon be lined up with the agreement of Apollo and Beal Bank, another Yellow term lender. Doing so quickly will let Yellow keep moving toward its targeted auction date of Oct. 18. (One veteran bankruptcy attorney told FleetOwner last week that timeline is "very aggressive.”)
Following the Aug. 11 hearing, Goldblatt scheduled a follow-up meeting about Yellow's DIP plans for midday on Aug. 15. But that hearing has since been rescheduled to Aug. 17, although Goldblatt noted that he might cancel the proceedings if Yellow and the other stakeholders in the case can in the interim agree to a DIP financing plan that he can approve.
In related legal matters:
- The U.S. Trustee in Yellow's case called a first meeting of the company's creditors for the afternoon of Sept. 14.
- In their newly filed (and very likely last) quarterly report with the U.S. Securities and Exchange Commission, Yellow executives say they could soon face large claims related to the company's multi-employer pension plans. Yellow has stopped contributing to those so-called MEPPs, which executives wrote could expose them to penalties: "The assertion and communication of a withdraw liability by the MEPP Funds would result in a material adverse effect on the company's liability balances, as the estimated withdrawal liabilities which may be asserted are in excess of $6.5 billion."
