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Yellow shareholder loses bid to quash pension claims

Whether or not Yellow was in default will sway recoveries on billions in claims

A federal bankruptcy court has yet to determine if Yellow was in default. (Photo: Jim Allen/FreightWaves)

A federal bankruptcy court in Delaware denied a motion from Yellow Corp.’s largest shareholder, MFN Partners, to reconsider its ruling that the defunct less-than-truckload carrier is on the hook for claims from pension funds potentially totaling billions of dollars. The claims stem from Yellow’s abrupt withdrawal from the multiemployer plans covering its former employees.

Judge Craig Goldblatt’s Tuesday opinion echoed the court’s Sept. 13 ruling, which said pension insurer Pension Benefit Guaranty Corp. had the authority to set up guidelines to ensure a 2021 federal bailout package wouldn’t be used to allow an employer to escape withdrawal liability.

Pension Benefit Guaranty Corp. (PBGC), under the direction of the American Rescue Plan Act (ARPA), determined that immediate recognition of bailout funds by the plans would eliminate unfunded vested benefits, wiping clean an employer’s withdrawal liability. Without any withdrawal liability, employers could be incentivized to exit pension plans early, the agency said.

To prevent a mass exodus by employers, PBGC established two rules. One required pension funds receiving special financial assistance to not recognize the money as a plan asset until received. The second was a requirement to phase in the recognition of those funds over time even though they were paid in a lump sum.


Yellow (OTC: YELLQ) and MFN previously argued that some of the pension plans Yellow contributed to, including Central States Pension Fund, were made whole by ARPA and that Yellow no longer has any withdrawal liability.

Tuesday’s ruling clarified that Yellow indeed owes the funds, but how much remains to be determined.

The court still hasn’t determined whether Yellow was in default, which would make the pensions’ claims immediately due without discounting to present value. Goldblatt previously acknowledged that his original opinion incorrectly assumed Yellow was in default prior to its bankruptcy filing. He has since amended that decision, leaving the question of default open for litigation.

Goldblatt has already ruled that a 20-year cap, established by the Employee Retirement Income Security Act, would apply to the claims.


Separate court filings showed Central States’ $4.8 billion claim could be as little as roughly $1 billion using the 20-year cap and potentially further reduced to $530 million depending on the discount rate used (if discounting is allowed).

Central States has asserted that the 20-year cap would be calculated off Yellow’s highest annual contribution rate of $79 million, implying almost $1.6 billion due. However, it has also questioned whether the 20-year cap should be allowed.

Claims from eight other multiemployer pension funds that received bailout money, as well as other funds that didn’t, have similar but smaller withdrawal liability claims against Yellow’s estate.

MFN Partners acquired a more than 40% equity stake in Yellow in the days leading up to its bankruptcy filing. The Boston-based private equity firm also provided bankruptcy financing to Yellow, the interest and fees from which have likely offset its downside risk in the stock.

Shares of YELLQ closed 45% lower on Tuesday at 55 cents per share. The stock fell nearly 90% when Goldblatt’s initial ruling was published as shareholders realized the payment of pension claims would likely result in little recovery for them.

MFN and affiliate Mobile Street Holdings recently purchased withdrawal liability claims from two separate pension funds, drawing the ire of the remaining pension funds, which argued the claims acquisitions place the investment firm in an “irreconcilably inconsistent” position as it is now fighting against the claims that it owns.

More FreightWaves articles by Todd Maiden


Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.