Nuggets from Yellow’s real estate auction and next steps, including large tax and interest savings

The first phase of Yellow Corp.'s real estate auction proved so competitive that the company's financial advisers took some of the bankrupt company's properties out of the mix, thinking they could score better deals through direct negotiations.

That detail and more financial nuggets are among the information filed ahead of a Dec. 12 hearing at which U.S. Bankruptcy Court of Delaware Judge Craig T. Goldblatt will be asked to approve the proposed sales of 130 properties to 21 buyers for nearly $1.9 billion, a figure that topped the stalking-horse bid from Estes Express Lines (No. 11 on the FleetOwner 500: For-Hire) by about $350 million.

Yellow's creditors are in line to also receive the proceeds from sales of the company's roughly 12,000 trucks and 42,000 trailers. But those dollars likely will arrive in smaller amounts and over a much longer period of time: After initially planning to auction their rolling stock, Yellow's leaders in October hired auctioneers Nations Capital and Ritchie Bros. and gave them until early 2025 to find buyers.

As noted in recent filings, Yellow is pushing out the timeline for auctioning off various real estate leases, and closing a portion of the proposed real estate sales by year's end will allow it to save about $10 million in taxes.

The successful auction raised prospects that Yellow's unsecured creditors would have a decent pot of money from which to be repaid. The $1.9 billion comfortably covers Yellow's $1.2 billion obligations to its secured creditors, which include the federal government in the form of the U.S. Department of the Treasury. When they filed Chapter 11 papers in early August after abruptly shutting down operations a week earlier, Yellow's leaders said the company had about $1.2 billion in secured debt on its books.

The real estate proceeds appear poised to grow significantly: In a Dec. 8 filing, investment banker Cody Leung Kaldenberg of Ducera Partners said the bidding that started on the morning of Nov. 28 was so intense for some sites that she and her team took them off the table "because we believed they could secure higher and better prices through an alternate sale structure."

Kaldenberg's filing doesn't detail which properties were set aside, but it's worth noting that the sites that haven't yet sold are mostly small—except for a 426-door terminal on more than 100 acres south of Chicago and a 304-door facility on about 51 acres north of New York City.

Other details about the ongoing process to divvy up Yellow's real estate portfolio:

Kaldenberg's filing notes that 120 entities showed serious interest in various Yellow terminals and that more than 70 eventually submitted bids. From that group, 62 were invited to take part in the auction.
Nearly all of Yellow's leases remain to be sold; only two leases were included in the recent deals for 130 properties. However, the company's advisers have paused that process and notified the court they will restart the auction Dec. 18.
Another financial professional working on this case, Brian Whittman of Alvarez & Marsal North America, told the court on Dec. 8 that wrapping up at least a portion of the 21 planned sales will let Yellow save about millions in federal taxes—and thus leave more money for creditors. Whittman wrote that putting a bow on the largest of the 21 proposed deals, XPO Inc.'s plan to pay $870 million for 26 owned and two leased sites, will help Yellow realize those tax savings. If that doesn't happen, closing "four or five" of the next largest deals would also do the job.
Whittman also sketched how Yellow can save significantly on interest payments if the real estate deals close by year's end. Just one element of the company's debtor-in-possession financing deals with hedge fund Citadel and investment firm MFN Partners, he noted, carries a 17% interest rate. Paying off that loan will save Yellow a whopping $230,000 per day.

Also: A. Duie Pyle's growth, Jack Cooper's rejection, and Estes' new equipment

Somewhat lost in the auction's $1.9 billion headline number and the large property pickups from XPO, Estes, and other big industry names were a series of smaller deals that are still very noteworthy for the purchasers.

Among them is the $29.4 million A. Duie Pyle Inc. (No. 80 on the FleetOwner 500) agreed to pay for four Yellow sites: two in Pennsylvania and one each in New York and West Virginia. Chairman and CEO Peter Latta said Dec. 8 his team is excited to take over the terminals, which will grow the 27-year-old company's network by nearly 13%.

"From a one-service-center LTL operation in 1996 serving a 60-mile radius around West Chester, Pennsylvania, we have grown into serving the entire Northeast U.S. that includes 14 states and Washington, D.C., from what will soon become 35 Pyle LTL Service Centers," Latta said. "Adding these latest facilities will create capacity to support the growth that we believe our team is capable of achieving."

Auction-related work has taken center stage of late and will likely continue to do so during what remains of 2023. Still, a few other things have been moving:

The successful auction also took off the table a potential sale of all of Yellow's assets to Jack Cooper Transport (FO500 No. 91), whose leaders had floated a long-shot bid to restart Yellow's operations and try to hire back many of the workers the company laid off on short notice this summer. Bloomberg reported that a Yellow attorney this week wrote to Jack Cooper leaders saying the offer wasn't viable in part because it hadn't gained traction among Yellow's creditors—including the Treasury, which issued Yellow a $700 million CARES Act loan during the heart of the pandemic.
In addition to the big-dollar efforts to auction its real estate and rolling stock, the Yellow team has also been looking to offload various other assets via small "de minimis" transactions. Those have included getting roughly $100,000 for bits of scrap metal at 79 sites around the country, as well as IT equipment from the company's four offices in the Kansas City area, which fetched around $400,000.
One deal has stood out from that pack in terms of dollars and because of the buyer: Estes Express Lines executives last month agreed to pay $2 million for "freight movement/quality tools, pieces of facility equipment and other miscellaneous parts and items" located at multiple terminals. That latter dynamic scared off other buyers, Yellow representatives said in a filing, and Estes was the only bidder to commit to picking up the gear on its own dime—in return for getting a solid discount on the nearly $2.6 million appraised value of the equipment.

This story has been updated to update Yellow's expected tax savings from its real estate sales to roughly $10 million from an earlier forecast of $37 million. At a Dec. 12 court hearing, a Yellow attorney said the previous estimate had used an incorrect model.