Yellow appears to have most of its latest bankruptcy plan squared away. The former trucking firm’s estate submitted an amended Chapter 11 plan to a U.S. bankruptcy court Friday.
But while that deal has the support of Yellow’s creditors’ committee, it still does not have the backing of the firm’s largest shareholder.
The joint Chapter 11 plan, filed in Delaware, details a settlement structure that would substantially reduce the billions in claim amounts asserted against Yellow’s estate by multiple pension funds. It also establishes that unsecured creditors will recover within a range of 12 to 17 percent of their original claims. The range is narrowed from the prior plan, which would have recovered the lenders anywhere from none of the claims to 26 percent.
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The pension funds’ liability claims now add up to $3.3 billion, with the firms expected to see a recovery between 12 percent and 16 percent. These claims include those from Yellow’s largest pension provider, Central States Pension Fund, which now shows $1.7 billion in withdrawal liability and contribution claims. This number is a substantial cut for Yellow—down from the $5.8 billion Central States originally claimed, with $4.8 billion tied to the withdrawal liability.
Claims from 10 other pension funds account for more than $1.6 billion of the $3.3 billion claims pool. Yellow’s estate got a significant reprieve with the new plan, as the prior claims across all the pension funds totaled roughly $7.5 billion.
Additionally, the plan also would set aside $30 million to $40 million for claims from former employees, covering unpaid vacation or paid time off pay, sick pay or sales commissions.
These totals remain projected to be paid in full and are subject to 100 percent recovery, just like the previous plan Yellow’s estate had outlined last October. However, the total is lower than the originally laid out $75 million to $100 million range in claims.
Those claims don’t include those of individual employees, and are separate from the Worker Adjustment and Retraining Notification (WARN) Act class-action claims that Yellow settled in late January.
The bankruptcy court has scheduled a vote deadline for the plan for May 9 and a confirmation hearing for May 19.
Yellow’s bankruptcy journey has lasted roughly 20 months, with the century-old less-than-truckload (LTL) company ceasing operations July 30, 2023. Less than a week after shutting down, Yellow officially filed for bankruptcy.
What remains undetermined is the status of MFN Partners, the hedge fund that scooped up more than 40 percent of Yellow’s shares during the early stages of the bankruptcy process two years ago. The fund told the court last month that it had been left out of the recent negotiating process and would nix a plan that didn’t benefit its claims.
Yellow argued at a hearing last Wednesday that MFN’s positioning would “gut consensus” that the recent plan achieved.
“A debtor in possession, as a fiduciary of its estate, must be given the ability to settle claims asserted against it both because the bankruptcy system promotes settlements and because any other outcome would give an objecting party such as MFN the unfettered power to derail settlements,” a Thursday letter from Yellow’s counsel to the court stated. “If MFN were allowed to exercise that unfettered power in these chapter 11 cases, the results could be disastrous for the remaining stakeholders of these estates.”
The court said it would delay a ruling to give Yellow’s creditors and MFN Partners more time to negotiate a final resolution.
The plan would establish a liquidating trust to wind down Yellow’s remaining assets, which is still an ongoing process. While the bankruptcy wraps up, Yellow recently terminated two terminal lease agreements in California.
Deals were agreed with landlords NATMI LPF Bloomington and M4 Terminals to end the leases of facilities in Bloomington, Calif., and Santa Clara, Calif., respectively.
The 325-door, 54.2-acre Bloomington site was the largest of the leased terminals still available in December. Yellow’s estate will recoup $55 million for the location.
These two terminations are part of the third phase of Yellow’s liquidation that has been ongoing since December. The trucking company has mostly sold off real estate via private sale transactions to firms including Knight-Swift, TFI International, A. Duie Pyle, Estes Express Lines, R+L Carriers and ABF Freight.
Yellow’s estate has sold more than 175 terminals for more than $2.2 billion since its liquidation first began in late 2023. With the recent sales and two terminations, Yellow has roughly 89 combined owned and leased terminals still under its estate.
A three-day auction process and bid deadline for the remaining terminals has continued to be delayed, with the trucking companies jumping the queue to ink the private sales with the administrators.
