Yellow Considering Alternate Bankruptcy Loan Offers

A Yellow Corp. truck is seen near its terminal in Miami, Fla., on July 8, 2003. Joe Raedle/Getty Images

Bankrupt trucking firm Yellow Corp is exploring alternate bankruptcy loan proposals instead of going ahead with a loan it already has on offer, the company said in a bankruptcy court on Wednesday.

Yellow had earlier considered taking a $142.5 million loan from Apollo Global Management to fund the liquidation. However, the firm decided against approaching the court for approving the loan as it received alternate loan offers from two other sources, the company’s attorney Pat Nash told U.S. Bankruptcy Judge Craig Goldblatt at a court hearing in Wilmington, Delaware, according to Reuters. Estes Express Lines, a rival freight trucking firm, and MFN Partners, an investment company that owns 41 percent of Yellow’s stock, have extended the loan offers.

Yellow is considering these loans as it negotiates with Apollo on how the new debts would affect the collateral rights Apollo has on a loan of $501 million already taken by the trucking company.

Mr. Nash told the judge that Apollo’s $142.5 million loan offer has features Yellow “doesn’t love,” including veto rights over “piecemeal” asset sales, a 90-day timeline for selling off the truck company’s assets, and high fees. Yellow intends to approach the court on Friday with a clearer picture of the loan it will choose.

Yellow filed for Chapter 11 bankruptcy on Aug. 6 after the company buckled under pressure from a mounting debt load as well as a standoff with an employee union.

The bankruptcy filing of the nearly 100-year-old Nashville, Tennessee-based company puts about 30,000 workers at risk at a time when the freight industry is already grappling with slumping volumes.

Weighing Loan Offers

Apollo’s $142.5 million loan offer would have required Yellow to sell off its assets within a 90-day period. In contrast, the proposals from MFN and Estes provide a 180-day period for disposing of the assets.

Dennis Dunne, a lawyer representing investment funds managed by Apollo, called the alternate loan offers under consideration by Yellow “uncommitted” proposals that may not eventually come through, according to Bloomberg.

Apollo is worried that the alternate loan offer from MFN could end up weakening the lien that exiting lenders have on Yellow’s assets. It is yet to review the loan offer from Estes, which Mr. Dunne claimed to only be an expression of interest.

“We hope that this doesn’t lead to additional delay and degradation,” he said during the Wednesday hearing.

Yellow attorney Mr. Nash pointed out that Estes’s $230 million loan offer is not only a higher amount but would be 2 percent cheaper than the 17 percent interest that Apollo and other lenders seek for their loan.

MFN’s lawyer insisted that its funding offer provides better economic terms to Yellow and said that they are willing to challenge Apollo’s loan offer.

When Yellow filed for bankruptcy on Sunday, the company had listed $39 million cash-in-hand, just enough to run a month-long sale of its real estate holdings, 12,000 trucks, and other assets.

As of Wednesday, Yellow listed total current liabilities of $1.92 billion and cash holdings of $112.8 million. For a company’s stock to have any value during bankruptcy, it has to pay off all its secured and unsecured obligations in full.

Worker Issues, Government Aid

Yellow CEO Darren Hawkins, blamed the company’s downfall on its botched relationship with the Teamsters union, which represented about 22,000 Yellow workers.

“All workers and employers should take note of our experience with the International Brotherhood of Teamsters (IBT) and worry,” he said in an Aug. 6 statement.

“We faced nine months of union intransigence, bullying, and deliberately destructive tactics. A company has the right to manage its own operations. But as we have experienced, IBT leadership was able to halt our business plan, literally driving our company out of business, despite every effort to work with them.”

“It is not common for someone to work at one company for 20, 30, or even 40 years. Yet, many at Yellow did. For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs, and fulfilling careers,” he said.

However, Teamsters blame the company’s decline on its management. Yellow’s downfall is “unfortunate but not surprising,” Teamsters General President Sean M. O’Brien said last week.

“Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry.”

In 2020, Yellow received $700 million in pandemic-era loans under the Trump administration on national security grounds.

However, a recent congressional probe concluded that the loan could have been a mistake. The company’s “precarious financial position at the time of the loan, and continued struggles, expose taxpayers to a significant risk of loss.”

The government loan is due in September next year. The company had repaid $230 million of principal and paid $54.8 million in interest payments as of March.

Meanwhile, the NASDAQ exchange notified Yellow that it has commenced proceedings to delist the common stock of the company. Trading of Yellow stock is expected to be suspended on Aug. 16.