A federal bankruptcy judge in Delaware admitted Monday to making a mistake in a September opinion regarding the treatment of roughly $6.5 billion in withdrawal liability claims against Yellow Corp. The prior ruling sent the defunct less-than-truckload carrier’s stock spiraling last month as shareholders came to grips with the notion that pension claims would likely see more than just the fractional recovery once thought.
Judge Craig Goldblatt’s initial opinion incorrectly asserted Yellow was in default prior to its August 2023 bankruptcy filing. The timing of the default could determine if the claims are due in full or are subject to a 20-year cap and discounting to present value. Goldblatt’s initial take was that the company’s default had accelerated the amounts due without the need for discounting.
He instructed counsel for both parties to submit written arguments, noting he couldn’t provide a decision until the timing of the default can be determined. The matter could ultimately be taken up at a later trial date.
Shares of Yellow (OTC: YELLQ) jumped 78% to 80 cents per share halfway through the Monday hearing before closing the day up 31%. The stock tanked nearly 90% from $5.20 to 60 cents the day Goldblatt’s initial ruling was announced.
Yellow’s largest shareholder, MFN Partners, joined Yellow’s counsel in arguing against the initial ruling. The Boston-based private equity firm, which also provided bankruptcy financing to Yellow, acquired a more than 40% equity stake in the company in the days ahead of its July 30, 2023, closure.
MFN and its affiliate Mobile Street Holdings have come under scrutiny from pension funds holding claims against the estate. Mobile Street recently purchased withdrawal liability claims from two separate pensions, placing it in an “irreconcilably inconsistent” position where it is now also fighting against the claims that it owns, the funds contend.
The pension funds said MFN attempted to conceal the claims purchases from the court by using an affiliate.
The Monday update from the court likely further delays a final Chapter 11 plan Yellow put before the court earlier this month. That plan, which outlines likely recovery scenarios for all classes of creditors, was initially held up for the Sept. 13 opinion deciding how the withdrawal liabilities would be treated.
The court also heard summary judgment motions regarding Worker Adjustment and Retraining Notification Act claims against the estate on Monday. However, Goldblatt deferred a ruling until the scheduled Dec. 9 trial date.