Trucker Yellow Files for Bankruptcy, Will Liquidate
The company’s chief executive says Yellow is closing after the chapter 11 filing, costing some 30,000 workers their jobs
WSJ
Yellow, the 99-year-old trucking company, filed for bankruptcy and is closing the business, falling victim to mounting debt including a government loan and a standoff with the Teamsters union.
The bankruptcy follows years of struggles for the Nashville, Tenn.-based trucker as it tried to address the debt it accumulated through a series of mergers and a $700 million federal Covid-19 relief loan during the pandemic. On July 30, the company shut down its operations and laid off a large number of workers.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” Chief Executive Darren Hawkins said in announcing the filing for chapter 11 bankruptcy protection late Sunday in U.S. Bankruptcy Court in Delaware.
Hawkins said the business intends to fully pay back the federal loan, which was given to the company in 2020 because of what officials at the time said was Yellow’s crucial role in national security as a transportation provider to the Department of Defense.
Whether the government recovers the money it lent would likely depend on how much Yellow raises by selling real estate and other assets in bankruptcy. But some lawmakers and analysts have said taxpayers could lose money. The Treasury Department took a 30% stake in Yellow as part of that aid package and that holding could be wiped out.
Yellow’s stock, which was trading at about $2.70 a share in July 2020 when it got the Covid loan, surged to nearly $4 last week in an improbable upswing as the company began to shutter operations. Yellow’s shares were down about 35% in trading Monday following the bankruptcy filing, to $2.36 a share.
The company said it will seek bankruptcy court authorization to make payments including wages, salaries and benefits.
The company said it has lined up a loan to fund its stay in chapter 11, including selling assets. Yellow owns some 12,000 trucks and dozens of freight terminals across the country.
Yellow listed 30 unsecured creditors in its bankruptcy filing, including BNSF Railway, Amazon.com and Home Depot.
Yellow’s demise also removes a major contributor to the Central States Pension Fund, a multiemployer pension fund that received a federal bailout last December under a program aimed at shoring up near-insolvent retirement plans.
Yellow was known for its cut-rate prices and moving freight across the country for Walmart, Home Depot and many other smaller businesses. Despite swallowing rivals several years ago, getting union concessions over the past 15 years and securing a government bailout in 2020, the company went into a financial tailspin this year as shipping demand foundered and an operational restructuring effort triggered a showdown with the Teamsters union.
The company made a couple of big acquisitions in the early 2000s, but was slow to integrate the businesses. It has faced down the risk of bankruptcy a few times over the past two decades. In 2010, the company averted bankruptcy after the Teamsters agreed to take cuts in pay and benefits.
The Teamsters blocked the company’s proposed operational overhaul this spring, leading to lost business with customers and difficulties in refinancing about $1.3 billion in debt that matures in 2024. Yellow warned recently it was running out of cash and had hired an investment bank to address coming debt maturities. It owed roughly $700 million to the federal government and more than $500 million to private-equity firm Apollo Global Management as of the end of the first quarter.
Hawkins, in a statement, blamed the union for the company’s failure. “We faced nine months of union intransigence, bullying and deliberately destructive tactics,” Hawkins said.
“Teamsters have kept this company afloat for more than a decade through billions of dollars in wage, pension and work-rule concessions,” a union spokesman said. “Yellow couldn’t manage itself, and it wasn’t up to Teamsters to do it for them.”
Since the 1980s, bankruptcy filings by trucking companies have virtually always ended in liquidations even though most companies seeking chapter 11 protection seek to preserve their businesses as going concerns.
The last failures of large trucking companies came in 2019, when truckload operator Celadon and less-than-truckload carrier New England Motor Freight both filed for chapter 11 and liquidated. One trucking executive said the strategy in such filings is to retain some control over the disposal of assets lost in a chapter 7 liquidation.
Yellow’s assets include dozens of truck terminals across the country, many in locations close to population centers that other trucking companies may want. The company has been disposing of some of those sites to raise cash, and it sold a terminal in Compton, Calif., earlier this summer for $80 million.
“Any opportunity to pick up properties along the way, we would have great interest in that,” David Jackson, chief executive of truckload carrier Knight-Swift Transportation, said on a July 20 investor conference call.
The company, formerly known as YRC Worldwide, stopped picking up shipments late last month and laid off a large number of nonunion workers on July 28. People familiar with the matter said it had kept some operations in place to get freight already in its network delivered or returned to customers.
Industry executives say they don’t expect major disruption in U.S. supply chains from Yellow’s collapse.
Much of Yellow’s business, which amounted to nearly 50,000 daily shipments earlier this year, had already shifted to other carriers. U.S. freight demand has foundered this year, and carrier executives say they have space for more volume.
“There’s no doubt, everybody has been hurting for business, so I believe there is ample capacity,” said Paul Svindland, chief executive of STG Logistics, a Bensenville, Ill.-based carrier.
