Yellow Corp. [NASDAQ: YELL] CEO Darren Hawkins is confident he can show lawmakers that his company’s $700 million CARES Act loan being scrutinized in a new congressional probe is in full compliance with the loan terms.
“Please be assured with respect to your question regarding our ‘eligibility for and use of the funds’ that the Subcommittee’s inquiry and Yellow Corporation’s documents will conclusively confirm that the information the Company provided in applying for the loan was completely accurate, and the use of the loan funds were and are completely appropriate, transparent, and in full compliance with the loan agreements,” Hawkins stated in a letter, excerpts of which were obtained by FreightWaves, sent on Thursday to the Select Subcommittee on the Coronavirus Crisis.
The subcommittee launched the investigation on June 3.
A major source of controversy about the loan, which has been under investigation since shortly after it was approved last year, has been questions over whether Yellow’s less-than-truckload (LTL) contract with the U.S. Department of Defense (DOD) controlled enough shipment volume to be critical to maintaining national security.
Yellow has asserted that DOD’s certification that Yellow provides 68% of LTL services to the department is accurate, and that lower estimates of between 20% and 40% provided by Crowley Logistics, which subcontracts to Yellow, were wrong. Crowley had also speculated — inaccurately, according to Yellow — that Yellow’s DOD capacity “could be readily replaced by other companies in the trucking industry.”
Hawkins said Crowley’s assessments stemmed from “an incomplete picture” that Crowley had of the freight services Yellow provides for DOD and other government agencies that is likely based on the amount of DOD business that Yellow contracts through Crowley.
For example, he stated, from March 2020 through February 2021, 25.2% of Yellow’s DOD shipments (48,653 out of 193,322) were sourced through Crowley, with the remaining shipments sourced directly from DOD. “Put another way, our contract with Crowley accounts for only one out of every four shipments that we carried for the DOD.”
Hawkins also emphasized, according to excerpts from his letter, that the CARES Act loan helped ensure that his company had the necessary liquidity to:
- Remain a critical link in numerous supply chains throughout the United States and complete millions of freight shipments, including hundreds of thousands for the Department of Defense.
- Enable our approximately 30,000 employees, including 24,000 union employees (mostly Teamsters), to remain working day and night on loading docks, in freight depots and on America’s highways to provide the uninterrupted delivery of desperately needed military supplies, personal protective equipment, household goods, medicines, food and other necessities.
- Enable us to continue to meet our obligations to fund the cost of medical coverage for our pensioners and employees, many of whom were front-line workers risking exposure to COVID-19 on a daily basis.
- Enable us to combat global warming by modernizing our fleet with safer, more fuel-efficient trucks and trailers, reform our business and return to profitable operations.
The committee requested that Yellow produce a list of eight types of documents related to the loan by June 17. “Counsel for the Company will contact the Subcommittee to meet-and-confer on the scope of its document requests and to reach a mutually acceptable schedule for our document production,” Hawkins stated.