It appears there is a bit of drama in winding down the operations of bankrupt LTL carrier Yellow (not long ago known as YRC Worldwide).
Supply Chain Digest Says...
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While such shareholders are usually wiped out after a bankruptcy filing, with the bids for Yellow’s network alone exceeding its secured debt, some shareholders are hoping their may be some money left for them as well now.
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Yellow is accepting offers for its network of freight terminals across the US, said to be 169 in total. On August 16, Yellow LTL rival Estes Express put in what is called a “stalking-horse bid” for the buildings and real estate, meaning its offer was subjected to being trumped by higher bids as part of a court-supervised auction.
And sure enough, another LTL carrier, Old Dominion Freight Lines, later offered $1.5 billion for the Yellow network.
Both the Estes and Old Dominion offers mean that Yellow’s biggest lenders, Citadel and the US government, which together are owed more than $1.2 billion on two separate loans, are likely to get their money back.
Why the larger than expected bids?
Many of the Yellow terminals are in or near metro areas where regulations make it difficult to build new terminals now, said Margaret Kidd, a supply chain and logistics professor at the University of Houston, told the Marketplace.com web site.
“You can’t just go into a major metropolitan area in most parts of the US and create what Yellow has created over the last 100 years,” Kidd added.
Separately, Yellow is also selling off its tractor, trailer, and some other assets, which it values at $900 million.
All of which is leading to some financial maneuvering.
According to a report this week in the Wall Street Journal, hedge fund manager MFN Partners owns about 42% of Yellow’s stock, and is now seeking the appointment of an official committee to represent shareholders’ interests in Yellow’s bankruptcy case, the company said in a securities filing Friday.
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 While such shareholders are usually wiped out after a bankruptcy filing, with the bids for Yellow’s network alone exceeding its secured debt, some shareholders are hoping their may be some money left for them as well now.
But for that to happen, unsecured creditors would also have to be paid first – and that includes the Central States Pension Fund, which covers Yellow’s union employees. Central States says it is owed billions of dollars in past and future payments.
The Central States fund said it will oppose the MNF move to form a committee to look after shareholder interests.
MFN is also a significant shareholder in Yellow’s LTL rival XPO Logistics.
You can expect a lot more wrangling to follow, with the final chapter in the Yellow story still being written.
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