A week after making a proposal to provide defunct less-than-truckload rival Yellow Corp. with debtor-in-possession (DIP) financing, Estes Express Lines has made an offer of $1.3 billion to acquire the bankrupt logistics company's real estate holdings, comprising 169 freight terminals. The previous $230 million DIP loan proposal made by Estes will not go forward.
Estes, based in Richmond, Virginia, has a fleet of over 9,600 trucks and 280 terminals across the U.S., Canada, and Puerto Rico, and also serves Mexico.
Yellow, based in Nashville, ceased operations late last month after its customers bolted to other carriers on the heels of a strike threat from its labor union, the International Brotherhood of Teamsters, over Yellow's failure to make pension and health care benefits payments for unionized employees. The shutdown and Yellow's early August bankruptcy filing, which its executives blamed on the Teamsters for allegedly obstructing its One Yellow financial restructuring, put roughly 30,000 workers out of work, 22,000 of them Teamsters members.
During the Aug. 17 hearing in U.S. Bankruptcy Court, Yellow’s attorneys said Estes submitted a so-called "stalking-horse" bid of $1.3 billion for Yellow's terminals. The stalking-horse bid places a floor under the planned auction of Yellow's properties and gives other potential bidders a number to beat.
The $1.3 billion figure, a lawyer for Yellow noted to District of Delaware Judge Craig T. Goldblatt, would cover a significant portion of Yellow's pre-bankruptcy debt and lease obligations. Yellow finished June with nearly $1.5 billion in debts—including the $720 million pandemic-era CARES Act loan from the Trump administration that the company still owes and that has come under much scrutiny. The 2020 loan gave U.S. taxpayers a 30% stake in Yellow.
In the Chapter 11 announcement, Yellow executives pledged to pay the loan from U.S. taxpayers back in full. But it will compete with Yellow's other creditors for settlement from upcoming asset auction proceeds. In addition to its real estate holdings, the defunct company and its subsidiaries held 12,700 tractors (about 1,000 of them leased) and 42,000 trailers (of which 7,200 are leased).
And the real estate holdings up for bid might also include six more warehouses run by Yellow's logistics subsidiary, if the planned separate sale of that subsidiary does not in the end take place.
Allison Smith, the Kirkland & Ellis attorney representing Yellow at the Aug. 17 hearing, told Goldblatt that intense negotiations over the past week with Estes and other parties in the Yellow case have made the process "a bit of a moving target" but added that she and her team believe there is consensus about the plans now coming into shape.
Teamsters, the union's Central States pension fund, and the Pension Benefit Guaranty Corp.—among others—want to recover as much as possible from sales of Yellow's assets. Yellow's executives noted recently that pension claims and penalties could grow to a whopping $6.5 billion, so some of the creditors' claims—including those from the labor union—could go unpaid in the wake of Yellow's bankruptcy proceedings.
Yellow (Ticker: YELLQ) was de-listed from the Nasdaq stock market when trading concluded on Aug. 15. The shares now trade over the counter and have lost 30% of their value since the delisting this week from Nasdaq.
For the full story and updates, visit our sister publication Fleetowner.com.
