Old Dominion Freight Line—and not less-than-truckload rival Estes Express Lines—will set the bidding floor for the sale of the more than 160 freight terminals of shuttered Yellow Corp., new court documents show.
In an Aug. 18 filing in the U.S. Bankruptcy Court for the District of Delaware, attorneys representing Yellow detailed interim financing plans to help the defunct company wind down its business and identified Old Dominion as the so-called "stalking-horse" bidder for its real estate portfolio. Thomasville, North Carolina-based Old Dominion, No. 10 on the FleetOwner 500 list of top for-hire fleets, is offering to pay $1.5 billion for Yellow’s network of terminals—topping the $1.3 billion bid No. 11 Estes tendered earlier last week.
The surprise bid by Old Dominion, which owns 256 terminals and has a presence in each of the lower 48 United States, will serve as a backstop for Yellow and calls for Old Dominion to put down a $75 million deposit and commit to its offer for at least 180 days. That timeline is in line with that of the other, short-term debtor-in-possession (DIP) financing that Yellow has negotiated and gives the company more time to find the most lucrative bids for its assets, either through a single transaction or a handful of smaller deals.
See also: Yellow’s exit ‘reshuffling’ the LTL deck
Word of Old Dominion’s offer to snap up Yellow’s real estate came about three weeks after President and CEO Marty Freeman and CFO Adam Satterfield discussed, albeit in roundabout and hypothetical terms, Yellow’s situation and its possible effects on the freight market as well as their own plans. Speaking to analysts on July 26 after reporting Old Dominion’s second-quarter results, Satterfield did, however, give a glimpse into the company’s real estate strategy that now sounds predictive.
“We’re always looking for opportunities, and that’s why we try to stay so far ahead of the growth curve,” Satterfield said at the time. “We generally are looking at each service center in each region and projecting out five years of potential growth to know where we’re going to have facilities that start hitting capacity. […] Sometimes, an opportunity presents itself [where today] maybe we don’t need this particular location. But in year four, for example, […] if it’s a good facility, then we would go ahead and take advantage of it.”
In an investor presentation issued between those remarks and its Aug. 18 bid for Yellow's terminals, the Old Dominion team pointed out that the company has, since 2012, grown its service center count by about 17%, while publicly traded peers have trimmed their collective network by more than 130 terminals, or by about 8%.
Old Dominion and Estes Express sit neck-and-neck on the FleetOwner 500 and in the asset competition: Old Dominion has more than 11,400 tractors and 46,000 trailers, while Estes operates around 9,600 tractors and 37,200 trailers. That both carriers’ C-suites have been willing bidders for Yellow’s real estate bodes well for creditors of the defunct, almost century-old, and former third-largest LTL in America.
The bidding also lends credence to the confidence expressed early this month by Yellow CEO Darren Hawkins that the Nashville-based company would be able to repay its creditors in full—including the U.S. government, which is owed nearly $740 million via a controversial pandemic-era CARES Act loan made by the Trump administration in 2020. The loan gave U.S. taxpayers a 30% stake in Yellow.
Piles and piles of debt to reconcile
Yellow filed Chapter 11 papers Aug. 6, a little more than a week after executives made the call to stop accepting shipments and lock up its terminals after customers defected in the face of a strike threat from its labor union, the International Brotherhood of Teamsters, over Yellow's failure to make several pension and health care benefits payments. The company listed debt obligations of more than $1.2 billion and another $359 million of letters of credit outstanding. In addition to the CARES Act loan owed the U.S. Treasury and taxpayers, the debt also includes a $485 million term loan now owned by prominent hedge fund Citadel.
A bidding contest over Yellow's real estate between rival carriers and potentially other investors now looks set to cover those obligations, which suggests that proceeds from the sale of Yellow’s roughly 12,700 tractors (about 1,000 of them leased) and 42,000 trailers (of which 7,200 are leased) will enable Yellow to send checks to unsecured creditors, which includes the Teamsters, the union's affiliated Central States pension fund, and the Pension Benefit Guaranty Corp., to cover pension obligations for unionized Yellow employees, who numbered around 22,000.
Also included in the Aug. 18 court filings were precise details of the debtor-in-possession funding that Yellow stands to receive from Citadel and MFN Partners Management, the investment firm that owns more than 40% of Yellow’s equity. A total of $142.5 million stands to come Yellow’s way in the coming weeks if it meets certain milestones in its push to sell off its assets. Citadel has committed to provide up to $100 million, with MFN pledging the remaining $42.5 million.
Judge Craig T. Goldblatt issued an interim order late on Aug. 18 approving the Citadel/MFN DIP plan—and freeing up the first $60 million in DIP financing for Yellow to pay bills and other wind-down expenses—and Old Dominion’s stalking-horse proposal. A final hearing on these matters has been scheduled for Sept. 18, by which time more bidders for Yellow's property portfolio may have materialized.
