Yellow Corp. has rejected an offer that would allow it to emerge from bankruptcy and restart operations, The Wall Street Journal is reporting.
A going concern bid led by Sarah Amico, executive chair at Jack Cooper Transport, was reported to be rebuffed late Wednesday in favor of the current liquidation process that appears likely to more than satisfy amounts owed to secured creditors.
The Amico offer was reported to include $1.1 billion in new financing, the issuance of $1.5 billion in preferred equity and the assumption of a more than $700 million Covid-relief loan from the Treasury. Part of the deal structure, however, would require Treasury to extend the maturity date of the loan by two years to September 2026.
The deal likely failed to garner support from Treasury and unsecured creditors, which included pension funds.
It appeared to be a failed venture from the start. The revived company would have been just a portion of its original size but with a larger debt burden. Further, there likely wasn’t ample capital to fund a successful restart. The best operators in the space have said it can take months for a new terminal to break even after opening. Also, Yellow’s freight was absorbed by other carriers in short order, potentially leaving it to compete via price to win customers back, which it has already proved was a losing endeavor.
A second-quarter filing with the Securities and Exchange Commission showed Yellow’s pension withdrawal liabilities were greater than $6.5 billion. However, bankruptcy experts have told FreightWaves those amounts would likely be negotiated much lower to reflect their present value and the resources the company has available to repay them.
On Monday, a Delaware court filing showed multiple less-than-truckload carriers held winning bids for 130 of Yellow’s more than 300 terminals. The allocations totaled nearly $1.9 billion, with XPO (NYSE: XPO) holding a winning bid of $870 million for 28 properties.
Estes won 24 terminals valued at nearly $250 million. The carrier’s $1.525 billion stalking horse bid announced in September set the floor for the auction that began on Nov. 28.
The court will hold a hearing to approve the first round of terminal sales on Tuesday.
Amico could still make an offer for Yellow’s remaining terminals to try and launch a new LTL offering.
The auction of Yellow’s 140-plus leased terminals is set to reconvene on Dec. 18. There are also 46 terminals owned by Yellow that are in the process of being sold. Those facilities may not garner the nearly $270,000-per-door price the first wave of the auction produced, but with roughly 3,200 doors remaining, those sites could bring in a few hundred million dollars.
Current landlords of the leased locations will have the ability to object to the assumption of their leases by other parties, and the amounts owed to lessors will need to be cured ahead of any lease transfer.
A recent court filing showed that Yellow owed Estes nearly $28 million on leases covering 14 terminals. The bulk of the amount due stems from unperformed maintenance and repairs, with roughly $700,000 tied to unpaid rent.
The court recently approved the sale of Yellow’s 12,000 tractors and 35,000 trailers through auction houses. That liquidation remains ongoing.
The unwinding of Yellow’s estate is expected to generate more than enough in proceeds to repay roughly $1.7 billion in debt held by secured lenders and the hedge funds providing bankruptcy financing.
Requests for comment from Amico and Yellow’s lawyers hadn’t been returned at the time of this publication.
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