Less-than-truckload carrier Yellow Corp. is reported to be nearing a deal with lenders that will provide it funds as it approaches a liquidation of assets in bankruptcy.
Apollo Global Management (NYSE: APO), one of Yellow’s current lenders, is reported to be leading a group that will provide Yellow with new capital in the form of debtor-in-possession financing, according to Bloomberg and Reuters. The investment could be a way for Apollo to secure a position atop the pecking order in a bankruptcy scenario.
The investment group has first-lien position on a portion of the company’s outstanding debt currently. The U.S. Treasury holds first-lien position on a $400 million tranche of a COVID-relief loan that Yellow (NASDAQ: YELL) used to replace tractors and trailers.
On Sunday, the Teamsters said the carrier notified union leadership it would file for bankruptcy. That announcement came a few hours after Yellow closed the gates at its terminals and posted signs saying it had ceased all operations.
Many of its nonunion employees were laid off on Friday.
Unable to reach terms with its union workforce over proposed operational changes, the company saw freight flee its network as many of its customers sought other transportation options fearing Yellow would soon be out of money and forced to close.
Yellow is also facing a debt load of $1.5 billion, $1.3 billion of which matures next year. It has maintained in recent months that its lending group required the change of operations to be approved by Teamsters before helping it restructure the debt.
Shares of YELL have increased more than fourfold since Friday’s closing price of 71 cents. Boston hedge fund MFN Partners has amassed a 42.5% (22 million shares) stake in the company since July 10.
Some in the industry have speculated that MFN’s relatively cheap investment in Yellow is a hedge to protect a nearly $900 million investment it has in LTL competitor XPO (NYSE: XPO). Shares of XPO have more than doubled since the beginning of the year, in part due to Yellow’s troubles. The ownership in Yellow would allow the firm to partially offset a potentially much larger loss in its position in XPO were Yellow to survive.
The firm may also be making a play that the value of Yellow’s equity is higher in liquidation as it would be valued on its assets and not its earnings potential.
Yellow owns 166 terminals (10,000 doors), which could fetch a large sum in an auction process. The company recently booked a $79.5 million gain from the sale of a shuttered Southern California property. In the fourth quarter, it recorded a $28.2 million gain from the sale of a terminal.
However, the equity play in a liquidation process would be risky as unforeseen unsecured claims likely pop up in the bankruptcy process, pushing shareholders further down the ladder of those being paid out. Also, unwinding the real estate portfolio can take time, as buyers would want to line up potential tenants and the end-of-line terminals in smaller, remote markets garner less interest.
More FreightWaves articles by Todd Maiden
- Yellow’s demise: 2 decades in the making
- Titanium Transportation makes 1st US acquisition
- Teamsters notified Yellow filing bankruptcy
SILLYME
YRC , The way THIS company let go of all thier employees on 7/28/2023 was horrible and their actions were out of GREED !!!! WATCH THIS COMPANY WILL BE COMING BACK UNDER A DIFFERENT NAME AND NON- UNION TOO…
My prayers are with those 30,000 families and my husband too after 23 years of loyalty to this company HE GOT KICKED ON THE BUTT!!!!!!!
Alex Taussig
Hi Todd, the terminal in Compton sold for 80M gross, so the gain would supposedly be less.
Jose Giordani
I think that since transportation got deregulated every big company and brokers destroyed the transportation, where every day you see owner/ops going out of business, I strongly believe that transportation need to be regulated,
SD
As a Yellow employee, or should I say FORMER employee now, we are all just sick! The last 9 months have been horrible for us, no one should have to endure the stress that we have endured on any job and now the stress of being jobless is just unbelievable! Most of the people at my terminal had been dedicated to this company for 20+ years, some even 40+ years. Just a sickening situation! My prayer is that all will find work swiftly.
Daniel Dillard
The union over played their position and now tens of thousands are all out of a job because of terrible management by YRC Corp and terrible representation of the union members by the Union…
Billy Manas
Who cares?
MD
The Teamsters Union and Sean O’Brien got exactly what they deserve. They were told for almost a year that the company needed change. The company was not asking for any give backs, matter of fact they offered more money to the employees but O’Brien refused to let the employees vote on it. Guess who’s gonna be next, ABF and T-Force. The non union carriers have much more flexibility and can operate without some union sticking their nose’s in to tell them how they have to operate. Unions are becoming obsolete as they are dinosaurs along with corruption, look at the UAW and for years the Teamsters Union was overseen by the US Government. They are crooks and do absolutely nothing for their members but blow smoke. Unions were good back in the days when we did not have the NLRB, OSHA, stricter DOT laws, etc;. Sean O’Brien and his cronies still have a job, the Yellow employees do not and the union is doing nothing to help them.
Joe Sunday
CHTS gets it. Look…the “bust” is ALL about the world of high finance, speculators, stock markets, and manipulators. First came the consolidators that built the house of cards; now come the manipulators to pick up the fallen. None of them really care about the teamsters, the drivers, the management, or the debtors. Now the game is all about following thru on their strategies and controlling and making the most of the assets that exist. Trust me, this is exactly what they teach in Ivy-League business schools. QUESTION: Why can’t most folks see this for what it is? The naive blame everything from the teamsters to the management, to the fuel prices, to tired trucks. ANSWER: Because probably those folks weren’t Ivy-League graduates. ~ BEEN TO HARVARD