Less-than-truckload carrier Yellow Corp. has filed for bankruptcy, putting an end to the 99-year-old trucking firm.
In its Chapter 11 filing in a Delaware court Sunday, the company estimated assets of $2.15 billion and liabilities of $2.59 billion. It expects to enter a debtor-in-possession (DIP) financing agreement to provide liquidity to sell its assets and to pay wages and vendors. Yellow listed $39 million in cash in the filing but said the company has lined up $142.5 million in DIP financing. Further, it said a recent appraisal of assets showed a value exceeding the amounts of the secured debt and the DIP facility.
Apollo Global Management (NYSE: APO), one of its current lenders, has been reported to be the likely lender of DIP financing. The private equity firm has first-lien position on $576 million of the company’s $1.5 billion of debt. It also has a better lien position than the government on a $300 million first tranche of a controversial $700 million COVID-relief loan.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” said Yellow CEO Darren Hawkins in a statement Sunday. “Today, 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.”
Yellow’s (NASDAQ: YELL) bankruptcy marks the largest filing in U.S. trucking history. The last major LTL closure was Consolidated Freightways, the third-largest carrier in 2002 when it filed. That carrier was generating roughly $2.3 billion in revenue with 20,000 employees (14,500 Teamsters).
Yellow had 30,000 employees, including 22,000 Teamsters.
Yellow has partnered with the American Trucking Associations to establish a job database specifically for former Yellow employees.
Downfall years in the making
Ultimately, Yellow was unable to push through a change of operations with the Teamsters union that would have provided it with more flexible work rules and further consolidated its terminals and operating cost structure. Yellow maintained if the changes were implemented its lenders would have been willing to restructure its debt, $1.3 billion of which matured next year.
The Teamsters contended the union had given enough in the past. Since 2009, the union estimates it consented to wages, benefits and changes to work rules equaling billions.
Last-minute scrambling to work a deal with the union, lenders, or to get the White House to intervene, would fall flat. In its public back-and-forth with the union, it came to light that the carrier could be out of funds as early as July. That sent shippers and third-party intermediaries searching for other capacity options.
A July 18 threat of a work stoppage over delinquent benefits contributions accelerated customer departures.
It was nearly two weeks ago when Yellow stopped making pickups. It laid off most of its nonunion employees on July 28. It closed its gates on July 30, saying it had ceased all operations. No public update was provided by the company. It was the Teamsters that made it known Yellow would be filing for bankruptcy.
While employees were terminated abruptly, the carrier’s ultimate demise was anything but.
Starting in the early 2000s Yellow leveraged up to make numerous large and small acquisitions, most of which it failed to integrate. It was saved from multiple brushes with financial ruin by the union, its lenders and the government.
In its last quarterly filing, it booked another net loss and logged an operating ratio (inverse of operating margin) above 100%. Its debt load was 4.6 times trailing 12 months’ adjusted earnings before interest, taxes, depreciation and amortization — more than twice a manageable level for a company that isn’t growing or making acquisitions.
What’s the stock worth?
In the end, the equity ended up being worth more when viewed through the lens of asset value.
Shares traded around $1.50 in May and June, plummeting to less than 60 cents in its final days of operation. However, when it became clear the company would file bankruptcy, effectively detaching valuation from forward earnings potential and to the value of its terminals, shares surged to more than $4.
Boston hedge fund MFN Partners amassed a 42.5% stake in the company from July 10 to the end of the month. Some speculated its involvement was a hedge on a $900 million investment it had in LTL peer XPO (NYSE: XPO), shares of which have more than doubled this year and would certainly fall if Yellow were to survive.
Others said the attraction to Yellow’s stock was the company’s 166 owned terminals (10,000 doors), which could garner a high price in liquidation. The company booked an $80 million gain from the sale of a Southern California property recently and a $28 million gain from a terminal sale in the fourth quarter.
However, that’s a risky play.
Many of its high-priced sites have likely already been shuttered or sold and leased back, a practice the company employed for years given its liquidity woes. Further, some of the portfolio may include smaller market, end-of-line sites where there likely isn’t a tenant replacement. It’s also tough to quantify how many legitimate unsecured claims from employees post termination, unpaid vendors, pension funds and the union will come forward, all of which will likely rank ahead of the equity holders.
The recent surge in shares was also likely influenced by the “meme stock” crowd, or retail investors hyping it up on social media. Trading volumes, often small trades, jumped exponentially (from 1.3 million shares per day in June to 220 million on last Tuesday) as the stock appeared to be passed back and forth by investors looking to make a big gain at the expense of short sellers that held their positions too long. The short interest on the stock was 19% on July 15, a high level that likely had some investors betting a short squeeze was probable. Once the stock started moving higher, short sellers began covering their positions by buying shares, sending the price even higher.
This is a developing story.
More FreightWaves articles by Todd Maiden
- Yellow’s demise: 2 decades in the making
- XPO to ramp up capacity to fill Yellow void
- Forward Air starting to see impact from Yellow’s exit
Hardworking Yellow fellow
As I’ve said before, there is plenty of blame to share here. Some of it falls on some of the workers, who wanted to be paid, but considered “work” to be optional. Sadly, they got paid the same rate as those workers who worked REALLY hard trying to keep the place up and running. Then there was the front-line management who didn’t take on the slackers and straighten them out. A much bigger share of the blame falls on the Teamsters leadership. Sean O’Brien’s conduct toward Yellow is reprehensible by any reasonable standard. Now 22,000 of his members are without jobs, along with 1,000 more members of other Unions, and 7,000 administrative and management staff..
Finally, the largest share of the blame falls on Yellow’s senior management. There have been three CEOs since 2000. The last one inherited the mess from the second-to-last one, who in turn inherited it from the third-to-last one. By most accounts, that’s the one who created the mess. The other two were charged with cleaning up the mess and didn’t succeed.
In their statements today, Yellow’s executives claim that the “One Yellow” concept was created in 2019. SO why wasn’t it put forth then, instead of three years later?? For that matter, why didn’t they seek to merge Yellow and Roadway for years, letting them compete against each other instead?
This whole thing is disheartening.
Debbie
BILL of retired Holland..my hubby too retired from there just before the Yellow take over….I agree..we are teamsters and union strong. For those that aren’t..you don’t belong on this site!
Pete Boese
I have heard of curious George, and now I have seen a post by clueless George!
Anyone blaming the teamsters for this has no clue what they are talking about!
Donna
Darren Hawkins, Zollars and the rest at the top have always been there to give you a slap in the face. They have NEVER looked out for the drivers or employees, only their own fate. The drivers take 15% pay cuts, give up vacation, give up pensions to keep this company going and then Zollars and Hawkins and their attorneys and such get bonuses. I agree that the bankruptcy courts need to look at their bonuses and stock and take that back.
Kafantaris George
The Teamsters got their fingerprints all over Yellow closing its doors. What the heck were they thinking?
TickedinOhio
hold up! I was with “YELLOW”, YRC, Yellow Freight, Yellow transportation…etc etc etc… whatever we are spending money to re-brand once again. we went from a great company to an absolute embarrassment. freight not labeled, no tracking info, severe damage, NO MANAGEMENT, NO accountability. ridiculous. as was said… our great CEO’s made a fortune while taking 15% of our pay etc.
lets look into how much our great leaders are worth now.
gates shut before being told the company was closed. lack of paying our health and welfare leaves us all with NO health coverage and without a time span to find coverage. talked to Teamcare (our healthcare) today and if we are to keep our coverage it is $ 482+ a week beginning this week for 2 of us. Thank you team Yellow… you are awesome. where is the Warn Act? where is our compensation ? we now have no jobs, no healthcare… poof. but i bet ol Darren Hawkins ain’t missin a meal.
hopefully we will see justice.
David Crisp
To see Darren Hawkins post a comment like that is an absolute joke and slap in the face to the rank and file and even management.
We all lost out and before anyone blames the union this has been coming for years. It’s my belief that even with a ratified contract this would’ve happened anyway.
If anyone is in need of a CEO that has single handedly overseen the destruction of 5 good companies and displaced 30,000 + people and has the experience to fail spectacularly then my I suggest do nothing Darren …
Jorge
Todd there is no comparison between CF and Yellow, remember Yellow is not paying the pension nowadays only 401k that is 15k dlls/yr compare to ABF (driver appreciation) those savings on behalf of Yellow is more than 3 billion and they are 1.5 in debt?!!, Yellow is a solid company with their inexpensive driver wages.