A Delaware bankruptcy court provided some clarity late Friday regarding $6.5 billion in withdrawal liability claims against Yellow Corp. The total amount the bankrupt less-than-truckload company will actually pay, however, remains to be decided. The mere fact that the estate will have to make good on some portion of the claims sent Yellow’s stock spiraling.
Shares of Yellow (OTC: YELLQ) fell 90% on Friday to 50 cents per share as stockholders realized their bet that the company’s asset value would exceed amounts owed to creditors may not come to fruition.
MFN Partners, which acquired a more than 40% equity stake in Yellow in the day’s leading up to a bankruptcy filing last summer, is the largest holder. However, the Boston-based private equity firm provided the company with bankruptcy financing during its liquidation, the interest and fees from which have helped offset its equity exposure.
The U.S. Treasury holds a 30% stake in Yellow. The equity was issued as part of a collateral package for a $700 million Covid-relief loan it provided to the company in 2020.
Multiemployer pension plans (MEPPs) to which Yellow once contributed claim the carrier’s abrupt shutdown a year ago means it’s now on the hook for its allocable share of unfunded vested benefits. However, Yellow has said that the plans are fully funded now, following a 2021 pension fund bailout package (the American Rescue Plan Act). Yellow contends its exposure is a fraction of the amounts claimed, if anything.
The legislation provided pension insurer Pension Benefit Guaranty Corp. the authority to craft guidelines to make sure the money would only be used to cover plan benefits and costs, and not to allow employers to skirt withdrawal liability.
Pension Benefit Guaranty Corp. created two regulations. The first said special financial assistance awarded to the MEPPs wouldn’t be recognized as a plan asset until the money was actually received. The second mandated the recognition of the funds would be phased in over time even though they were distributed in a lump sum.
The organization said the goal was to keep other contributing employers from using the bailout as a way to exit the plans. Immediate recognition would mean the MEPPs are fully funded, removing any unfunded vested benefits and consequently an employer’s withdrawal liability. That could have created a mass exodus from the plans, PBGC claimed.
Judge Craig Goldblatt’s Friday opinion sided with both the MEPPs and to an extent Yellow.
He said PBGC acted within its authority when putting up the guardrails on the program and that the MEPPs didn’t have to recognize the payments as an asset until received, and that they could be phased in. The implication is that Yellow is now responsible for some form of withdrawal liability to 11 different MEPPs that received government funds.
Central States Pension Fund holds nearly $5 billion in withdrawal liability claims against Yellow. It was awarded $35.8 billion in special financial assistance on Dec. 5, 2022, but didn’t receive the funds until Jan. 12, 2023, after its plan year ended. Yellow filed for bankruptcy on Aug. 6, 2023. The unfunded vested benefit calculation used plan year 2022 to determine the amount owed.
“The regulations implement Congress’s specific directive in the American Rescue Plan Act that special financial assistance be used only to pay plan benefits and costs,” Goldblatt said. “The regulations prevent such funds from instead being used, in effect, to reduce amounts that employers would otherwise be required to pay upon withdrawal from a plan.”
However, Goldblatt also entered a partial summary judgment in favor of Yellow, citing that the 20-year cap (established by the Employee Retirement Income Security Act) should be placed on the company’s total withdrawal exposure. Essentially, the court ruled that Yellow is responsible for 20 times its annual contribution amount per the statute. Past court filings from Yellow have estimated a total liability of roughly $1 billion when using the 20-year cap.
Yellow previously asserted discounting to present value should apply to the 20-year stream of payments. However, Goldblatt said its default on the contributions accelerates the amounts to “presently due and owing,” and no discounting is needed.
He also upheld an agreement inked between Yellow and Teamsters funds in New York and Western Pennsylvania. Yellow reentered those funds in 2013 under a deal in which it would contribute just 25% of the usual rate, but it would repay any withdrawal liabilities assuming a 100% contribution rate if it withdrew.
Goldblatt directed the parties to hash out the actual amounts due. He said the task may be “relatively easy to resolve” now that the court has ruled on the disputed legal questions.
Yellow still faces a much smaller pool of withdrawal liability claims from pensions that didn’t receive special financial assistance.
The 11 MEPPs party to the Friday opinion received more than $40 billion in assistance from the government.
Bob Barnes
They deserve there money since management ran the company into the ground
Greg Drennen
I only got 74 percent of my pension because Yellow didn’t pay into it I had 32 years vested and had to take a 6 percent penalty for going at 62 years I have a heart problem Afib
Brian McCollum
All they talk about is their shareholders concerned about them what about the employees that took pay cuts concessions for a decade to keep the company going they can’t even pay us our vacation money they owe us and it’s been over a year we should come first what’s wrong with this picture.. and yes they owe us the warn act money too they stopped picking up Freight refuse to pick up Freight we still came to work till they put a sign on the gate and locked it.. we gave all we could and was asked…its are turn… we deserve it..24 yr over the road driver employee
Johnson
I see they have not mention the WARN ACT.
Also the trailers and tractor and steal in use..
Chapter 11 means they are in business. And like glen mention their should be and investigation, into malicious and intent of funds of this company.
Greg
I couldn’t agree more with Glen. They need to be held accountable and pay what’s owed to .the employees by way of the WARN Act and make us whole.
Kevin whited
I worked for Roadway Express and then YRC from about 1989 to 2018 when I had a brain injury and had to stop working. When I started at the age of 19 I took this job because the retirement and pay was very good. I worked night shift most of the 25 plus years I was there putting a lot of stress and pain on my family members but I thought it would make sure my family and I would be better off because of the retirement and insurance was going to be there for my family. Through the years this company robbed and took and took from YRC employees but promised it would be there for us while taking that money and giving it to the top YRC management. Working in -0 to well over 100 degree weather out side with just a metal roof over our heads in nasty dangerous conditions. I’m 55 now and no telling if I will ever get my retirement or anything from this company is sickening. So many of my friends have past away even before receiving 1 cent of there retirement and the top management have received more money than I would make in a life time makes me sick to my stomach. This company has always blown money like it grew on trees and treated its employees like dirt. There needs to be a lot of top YRC management going to prison instead of spending all that money that my fellow employees and I have bled for to provide for our families and now may get pennies and a lot have had to start over in there 50 s and 60 s is heart breaking. I’m not complaining because I’ve always had to work and was blessed by god to work and provide for my family but to have it taken away and YRC has no remorse about stealing all the employees money and giving it to the top management should be illegal and jail time taken there home and lifestyle away from them and let them see how we have felt after working our whole lives and being left with nothing after all the sacrifices we made just to have a little piece of mind before we die. I hope someone reads this that can stand up and help fight this corruption because these large companies are going to keep doing this as long as no one has been held accountable. I pray every day that person would step forward and give us a little light at the end of the tunnel and relief. God bless all who gave there time and there life working at YRC all those years and just maybe it can work out so everyone can get what was promised for so many years of back breaking work
James bavoso
They took all our$$$$$$ these clowns & screwed all the workers.
Glen
The CEO and upper management need to be investigated for embezzlement, where did all the money go from the concessions the employees made for 14 years? Something just isn’t right. To the companies that hired the ex CEO’s of Yellow, your making a huge mistake hiring these incompetent clowns…