One aspect of the Yellow bankruptcy that looms in the background is that the LTL carrier has not defaulted on its senior secured debt and may not do so.
Buried within a more than 300-page document that spells out the provisions of the debtor-in-possession (DIP) financing that Yellow has obtained from Apollo Management is the history of the “roll-up” agreement that the filing says has been agreed upon by the other secured lenders.
In a bankruptcy, lenders of the DIP funds go to the head of the line when assets are sold off. But the filing on the DIP financing describes the lenders as “oversecured,” in that the assets of Yellow exceed the size of the DIP financing.
In its Chapter 11 filing in a Delaware court Sunday, the company estimated assets of $2.15 billion and liabilities of $2.59 billion.
The bankruptcy document that spells out the secured obligations says Yellow’s (NASDAQ: YELL) debt consists of $485.3 million in a senior secured term loan, believed to be held primarily by Apollo Management, about $737 million in loans from the U.S. Treasury and less than $1 million in borrowings from an asset-based lending facility. It also has about $360 million in undrawn letters of credit under that ABL facility.
Under the terms of the DIP financing, Yellow will be provided with $142.5 million in what the document describes as a “new-money senior secured super-priority debtor-in-possession facility.” Adding in the “roll-up” of existing obligations from Apollo Management, the filing puts the value of the combined DIP facility at $644 million.
But even after that, the Yellow document says, the company has “had their extensive portfolio of real estate, equipment and other assets professionally appraised at an aggregate value that, if and once monetized at such appraised aggregate value, would exceed the aggregate amount of the (Yellow) prepetitioned secure debt (debt incurred prior to the bankruptcy) and the DIP facility.”
That Yellow had not taken steps that would be considered a default on its debt was an aspect of the action taken last week by S&P Global Ratings (NYSE: SPGI), which lowered the debt rating on Yellow but notably did not reduce it to D or SD, which represents default or selected default. The latter classification generally comes after a company restructures its debt to extend payment lengths or make other changes but remains a going concern.
The debt rating was cut to CC from CCC-. As low as CC is, there actually is one additional notch below it before a D or SD can be applied.
It was published by S&P Ratings last week when the company had said little publicly but FreightWaves reported that Yellow was rapidly winding down operations.
“We believe the company is at heightened risk of a potentially imminent bankruptcy filing, nonpayment of its debt obligations, or a transaction akin to a distressed exchange,” S&P said in its report.
But the documents filed in connection with the bankruptcy on Yellow’s repayment of its secured obligations suggests that nonpayment or a distressed exchange is not imminent.
At the end of any restructuring are the shareholders, but before that comes the unsecured creditors. The bankruptcy filing lists the number of unsecured creditors at more than 100,000.
But the filing form also presents two options on the ability to pay unsecured creditors: “Funds will be available for distributions to unsecured creditors” and after payment of administrative expenses, “no funds will be available for distribution to unsecured creditors.” The option of repaying the unsecured creditors was checked in the document.
The S&P outlook on Yellow is negative, which S&P says “reflects our expectation that a default or restructuring is a virtual certainty amid reports of an operational shutdown, volume diversions and contentious union negotiations.” It also said liquidity is “likely to become further constrained given the impact of recent developments.”
The document dealing with the DIP filing said Yellow was down to about $39 million in liquidity, though the DIP financing — which has been agreed to by the U.S. Bankruptcy Court in Delaware — eases that squeeze as Yellow moves toward a sale of its extensive assets.
The bankruptcy filing lists the number of unsecured creditors at more than 100,000. But the filing form also presents two options on the ability to pay unsecured creditors: “Funds will be available for distributions to unsecured creditors” and after payment of administrative expenses, “no funds will be available for distribution to unsecured creditors.” The option that funds will be available for unsecured creditors was checked.
The original document lists the company’s 30 largest unsecured creditors. The top five are:
- BNSF, owed $6.3 million.
- EXL Service Holdings, owed $3.3 million.
- Amazon, owed $2 million.
- Pilot Travel Centers, owed $1.9 million.
- Home Depot, owed $1.67 million.
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cfdockman
The little guy always gets screwed.
Charles Angeli
They had a lower cost driver expense for years, and took three thriving freight companies- New Penn Holland and Reddaway and ruined them !!! They have no idea that basic freight 101 is the timely pick up and delivery claim free ,witch these companies did every day !!! Their mismanagement of basic principles was there demise, couldn’t be saved by One Yellow or any other foolish idea !!!
R Bridgeman
The company should not be allowed chapter 11 if you looked at the ins and outs the company was acquiring huge amounts of revenue . But was operated by the worst management team in the history of the United States ,
No one should be getting bonuses when your loosing money in fact they should of been trimming the fat , starting with the high Salary position they did not need 5 Bosses standing on the Dock thinking of. What to do next that’s just stupid .
First yes the company needs restructure so let’s fire all the collage educated idiot’s that ran this place in the ground these fools all they seen was Dollar signs not people , the people are the ones Responsible for creating the company and keeping it producing all these years , this is something that all American Business are loosing site of this is what made America Great not the Rich Collage educated Fools (like our foreign Competition ) this is becoming the down fall in America .
When people went to work and could work there way to the top of the Company the American Business thrived the Quality was superb to None , Why Because American Were Proud of their Jobs And Happy To Be Doing Them Because they new Deep down they had a chance to become someone in their Company . Now all of this feeling of accomplishment is Gone
Craig
Hawkens is a piece of crap. He’s blaming the teamster for this when it’s really him and the other clowns that did this. He needs to take blame for 30,000 out of work. Teamsters gave back enough. And good paying job yea right they paid crap. Tired of Hawkins blaming the Teamsters but takes no blame at all. One Yellow was just another way to screw the employees over again. Hawkens how about paying the pension up to date from 2011. Chapter 11 is for reorganize but at the same time Yellow couldn’t manage the money befor.
Carl Stanoyevic
The liquidation of assets at Yellow is how Bill Zollars and Daren Hawkins are going to cash in all the millions of stock options they have. This wasn’t done on a fluke Bill and Daren are getting up in age they want what they quietly stole from Yellows employees and stock holders Zollars had this figured out a long time a go. Look what he did with the airlines. Hawkins Is so tied into the ATA, who hates truck drivers his love for the elite owners is why this is happening. I wished Hannity or Steve Doucy could interview these two clowns on behalf of the employees and stockholders. The public has a right to know!!!!
Ed
Maybe I’m stupid but Chapter 11 used to mean a reorg and keep operating. I don’t see why they can’t reorg….would make sense as long as they reorged as non union AND existing upper management gets flushed. I read a previous article from somewhere showing a balance sheet of 1B | 10B ….this article says 1B | 1B ….and there’s the possibility this whole bankruptcy has been a plan for a long time. Situation looks like it is fluid and changing. I could be wrong but I say do a re-org and pay the creditors and I’m not sure that isn’t already the plan
Craig
It’s amazing. Yellow owed so much money. Spent 37 years with that company. Well don’t blame the Teamsters for this. You Need to thank Zollars,Hawken and the rest of the Board for this. The courts need to go back and see how much Bonuses they all took and take it all back. They alone closed Yellow from the mismanagement of the company.
Paul
Why don’t employees get paid first like cover there medical andd do pendions