The Teamsters union on Tuesday called on the U.S. Senate to investigate Yellow’s bankruptcy as part of a broader investigation the lawmaking body’s judiciary committee is conducting on “corporate manipulation of Chapter 11 bankruptcy.”
Chapter 11 filings are more and more being used as a path to liquidate assets instead of attempting to restructure operations and outstanding obligations.
“Yellow is trying to fast track liquidation,” said Fred Zuckerman, Teamsters general secretary-treasurer, in a statement. “We haven’t had bankruptcy reform in this country for nearly two decades. We need to take this opportunity to right the wrongs at Yellow and prevent them from happening again.”
He said that more than 22,000 union employees are out of work even though they conceded to more than $5 billion in wages and benefits concessions over the past 14 years to keep Yellow in business.
The statement also took issue with retention bonuses totaling $4.6 million, which the company paid ahead of its bankruptcy petition. The payments are not uncommon in bankruptcy proceedings and are used to retain key executives, who are often integral in helping to wind down an estate.
“Yellow approved millions in executive bonuses in June at the same exact time that they were voluntarily choosing not to pay millions in worker health care and pension benefits, said Sean O’Brien, Teamsters general president. “Workers in this country need real protections against corporations who game the system. We need real reform now that puts workers first in this process.”
As tensions between Yellow and the Teamsters grew and talks over a proposed change of operations broke down, the company said it would withhold benefits contribution payments totaling more than $50 million in efforts to preserve cash and keep its doors open. Facing a suspension of health benefits, the union issued a strike notice, which resulted in freight fleeing the carrier’s network. Yellow eventually ceased operations on July 30, filing for bankruptcy one week later.
The Teamsters statement said “expedited liquidation would preclude a potential purchase of Yellow’s assets from any party that may want to re-establish operations.” However, virtually all of the company’s customers had pulled their shipments by late July, with most employees being dismissed around that time. The few employees remaining currently are helping customers retrieve freight from the network and preparing assets for auction.
On Friday, a Delaware bankruptcy court judge approved some key orders, including bidding procedures for the asset sales and a debtor-in-possession financing package to fund the unwinding of the estate.
Private less-than-truckload carrier Estes Express Lines has placed the leading bid for Yellow’s portfolio of 174 terminals. It entered a $1.525 billion stalking horse bid that beat out a previous offer from LTL carrier Old Dominion Freight Line (NASDAQ: ODFL). The winner of the stalking horse bid, which sets the price floor for the assets to be sold, is expected to be announced Friday.
The rolling stock that Yellow owns, which includes approximately 12,000 tractors and 35,000 trailers, could hit the auction block next month.
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