Knight-Swift Transportation Holdings is preparing to take over 10 Yellow Corp. properties, adding to deals it struck late last year for 15 other real estate sites that the defunct carrier had operated.
Attorneys for Yellow, one of the country’s largest less-than-truckload carriers until it abruptly closed its doors last July, this week told the U.S. Bankruptcy Court for the District of Delaware that the company’s marketing of the 10 leased sites in Colorado, Georgia, Idaho, Kansas, Missouri, and Nebraska had led to Knight-Swift submitting a $2.2 million bid. The companies’ planned deal will go before Judge Craig Goldblatt later this month.
Phoenix-based Knight-Swift, No. 3 on the 2024 FleetOwner 500: For-Hire list, has been one of the big real estate beneficiaries of Yellow’s exit from the market. In December, the company’s leaders secured two deals as part of separate auctions of owned and leased properties. Combined, its previous bids of nearly $52 million have secured properties in 10 states.
Yellow and its advisors have sold 118 buildings the shuttered company had owned, as well as 25 leased properties. Combined, those transactions have generated roughly $1.9 billion so far, a figure that will close in on $2 billion in the coming weeks as a handful of other sales are finalized. Yellow’s executives have used those proceeds to pay off their most considerable debts, including the $700 million CARES ACT loan granted by the federal government in 2020 and post-bankruptcy financing provided by hedge fund Citadel and investment firm MFN Partners.
In recent court filings, Yellow said it is still marketing 46 properties it owns, as well as another 108 it is leasing, and that the success of the real estate auction process so far has left it with about $300 million on hand.
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It’s not yet apparent who, with Yellow’s largest debtors satisfied, might be at the front of the line to collect most of that money as well as proceeds from future real estate sales. Holders of Yellow’s common stock—MFN is the largest with more than 40%, and the government owns 29.6% courtesy of its CARES Act funding—are looking for their share, but their claims are, as of today, overshadowed by those of the Central States Pension Fund and other retirement plans. Central States, which is affiliated with the International Brotherhood of Teamsters union, has filed claims for more than $5 billion, and other pension plans also have said Yellow is required to contribute buckets of money to cover their obligations.
Lawyers for Central States recently argued that the pension funding dispute ought to be handled outside the bankruptcy process by an arbitrator. Yellow’s attorneys say the pension fund’s bailout last year means it can’t ask Yellow to pay up. In addition, Yellow claims that Central States has submitted to the bankruptcy court’s jurisdiction by filing claims there against the company.
Recently, the Yellow team sought to set a schedule to govern the resolution of this thorny question—which also involves the Pension Benefit Guaranty Corp.—via discovery and depositions this spring, followed by a trial in August. Goldblatt was set to address that proposed schedule at a hearing on the morning of Feb. 14.
More legal tussling also lies ahead outside of Yellow’s Chapter 11 process: Ahead of closing the company’s doors last year, CEO Darren Hawkins and his team accused the Teamsters of breaching their contract and sabotaging Yellow’s business. Their lawsuit asked a jury to award Yellow $137 million in direct damages as well as “at least $1.5 billion” in lost enterprise value.
“Yellow [will] keep its promise to the 30,000 former Yellow employees who lost their good-paying jobs by seeking redress from the IBT for causing Yellow’s bankruptcy,” attorney Marc Kasowitz of Kasowitz Benson Torres LLP said in a recent statement.
