Trucking giant Yellow has filed for Chapter 11 bankruptcy, marking the final chapter for the 99-year-old company felled by union clashes and ballooning debt – including a much-scrutinized $700 million pandemic loan from the Trump administration.

“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” Yellow chief executive Darren Hawkins said in a news release Sunday.

The filing Sunday in U.S. Bankruptcy Court for the District of Delaware caps a turbulent summer for the “less-than-truckload” freight hauler, which specializes in moving relatively small loads. It experienced heavy business losses as it battled with the International Brotherhood of Teamsters over a plan to restructure the company and refinance $1.3 billion in debt coming due in 2024. On July 30, the union announced that Yellow had ceased operations, casting 30,000 people out of work, including 22,000 of its members.

Yellow’s secured creditors, which typically have priority in bankruptcy proceedings, include Apollo Global Management, whose $600 million loan to Yellow matures in 2024. Another is the Treasury Department, which in July 2020 provided the company with a $700 million coronavirus relief loan.

The list of unsecured creditors, which typically sit lower in the pecking order, include BNSF Railway, Amazon and Home Depot, according to the bankruptcy filing. (Amazon founder Jeff Bezos owns The Washington Post. Interim CEO Patty Stonesifer sits on Amazon’s board.)

Questions remain about how much the federal government will recover; Yellow’s debt has grown to $729.3 million because of interest.

Experts say it’s unclear whether taxpayers would get back any money at all. The government would be in a weak position in bankruptcy court because it stands behind other creditors to recoup one part of the loan and is entitled only to trucks and trailers purchased with another part.

And the 30 percent equity stake that the Treasury Department received in return for granting the loans is probably “worthless,” Adam Levitin, a law professor and bankruptcy expert at Georgetown University, wrote in a blog post Wednesday.

“There’s no way to sugar coat this: Treasury’s screwed on the Yellow loans,” Levitin added.

Bruce Alan Markell, a professor of bankruptcy law and practice at the Northwestern Pritzker School of Law, agreed that “it does not look good for the government.”

“But then,” he added, “many loans made in distress situations don’t.”

The Treasury Department did not immediately respond to a request for comment Monday morning.

A congressional report published in June found that the loan’s certification was marked by missteps and risked losses to taxpayers, even amid government’s frenzied effort to keep the U.S. economy from sinking in the thick of the pandemic. Senior Trump administration officials were involved in approving the loan, despite recommendations from Defense Department staffers that the loan should not be certified.

Although the company has made some $68 million in interest payments as of July, it has not made a dent in the balance – delivering just a single $230 payment toward the principal amount, according to a recent Treasury report.

Yellow said Sunday that it expects to enter into a debtor-in-possession agreement pending court approval, meaning it will receive funding to keep the lights on as it winds down operations and sells off assets.

Bruce Chan, a transportation-sector analyst at the investment banking firm Stifel, said in an interview that Yellow’s real estate holdings could provide enough value to meet some of its obligations.

“You’ve seen a couple of terminals in the past year or so go for pretty staggering amounts of money,” he said.

As of February, Yellow owned 166 terminals, according to a recent filing, and in late 2022 it sold one terminal for $31 million. Moreover, the company used $400 million of Treasury’s loan to purchase more than 1,100 tractors, 1,600 trailers and 140 containers in early 2021, according to FreightWaves, an industry publication.

While the Treasury loan is secured by that rolling equipment, it will see losses because those assets “depreciate as soon as they come off the lot,” Levitin noted in his blog post.

Yellow’s troubles predate the pandemic, stretching back years, analysts say, beginning with acquisitions in the 2000s that weren’t properly integrated into its business. That resulted in inefficiencies and financial struggles: Yellow has recorded annual losses most years since 2007. And those shortfalls led to tensions with the union over wages and benefits, culminating in the company’s implosion and the complicated efforts to refinance $1.3 billion in debt due in 2024.

In his statement Sunday, Hawkins blamed the company’s unraveling on the union.

“We faced nine months of union intransigence, bullying and deliberately destructive tactics,” he said. “A company has the right to manage its own operations, but as we have experienced, IBT leadership was able to halt our business plan, literally driving our company out of business, despite every effort to work with them.”

The Teamsters did not immediately respond to a request for comment. Sean O’Brien, the Teamsters’ general president, last week blamed Yellow’s troubles on mismanagement, adding that company ceased operations “despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government.”

The trucking giant’s absence will disrupt the less-than-truckload market – perhaps resulting in higher shipping prices for some customers – but it won’t be enough to cause a repeat of pandemic-era supply chain disruptions, Jack Atkins, managing director at Stephens, previously told The Washington Post.

Hardest hit will be the displaced workers, who will be competing for jobs during an ongoing freight recession as consumers return to pre-pandemic shopping habits and demand has cooled for deliveries of electronics, apparel and furniture. Drivers have been bailing on the industry in big numbers, a marked contrast from just two years ago, when the White House mobilized to attract more people into the profession with paid apprenticeships and outreach to military veterans.

That said, the freight market is still “very good” compared with the pre-pandemic freight market, according to Chan, the transportation analyst. He points to a strong job market more broadly.

“It’s a tragic loss of jobs,” Chan said. “But for the most part, [these workers] have more opportunity than previous freight recessions to find some sort of alternative employment.”

As terminals shut down last weekend, workers took to social media, posting videos of empty terminals and saying their last goodbyes – some to jobs they had held for decades.

“I’m walking our dock just because it’s quite possibly our last time,” a worker in Richland, Miss., posted in a TikTok video that showed a deserted terminal. Several commenters said that they, too, had been let go, some after decades with the company, which was once the nation’s largest freight carrier, with some 300 facilities and a fleet of 12,700 tractors and 42,000 trailers.

“Got the call just before noon today,” one of them wrote. “This is awful.”

On Aug. 1, an idled Yellow employee from California filed a proposed class-action lawsuit under the Worker Adjustment and Retraining Notification Act, alleging employees did not receive 60 days advance written notice before being let go. The lawsuit demands unpaid wages.

Yellow said Sunday the debtor-in-possession arrangement will allow the company to pay “obligations related to employee wages.”

Leonard Crack, a dockworker in Copley, Ohio, told The Post last week that his job with Yellow had provided him with a steady paycheck for nine years. With no prior warning from either his employer or the union, Crack received a call last weekend informing him he was out of the job, he said.

“I feel like Yellow has done us very dirty,” the 45-year-old said. “I think these higher-ups, they’re a bunch of crooks and thieves and they stole from us.”

All that debt the company had accumulated, he said, “should have been paid off a long time ago.”

Copy the Story Link

« Previous

U.S. government shutdown threat builds, imperiling soft landing for economy

Next »

Boeing’s 1st astronaut flight bumped into next year, more repairs needed