Bankrupt Yellow evens up with feds, repays $700 million loan with interest
As far as the federal government and bankrupt trucking giant Yellow Corp are concerned, they’re even. In fact, Yellow says the government is better than even.
It’s hardly much consolation to its 30,000 or so former workers—or shippers left without Yellow’s reliable capacity for 49,000 less-than-truckload (LTL) shipments a day—but Yellow says it has repaid in full a $700 million loan approved for the struggling trucker in the final days of the Trump administration.
On top of the loan, Yellow’s bankruptcy attorneys say they have paid an additional $151 million in accrued interest.
Yellow, the nation’s fifth-largest overall trucking company with $5.2 billion in annual revenue, ceased operations with its bankruptcy announcement on Aug. 7.
But before that, Trump’s Treasury Department approved the controversial $700 million loan for Yellow in July 2020 under a provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The argument for the loan was that Yellow was deemed critical to U.S. national security. While Yellow did do some hauling for the Department of Defense, so do an additional estimated 4,000 or so other carriers who haul DoD freight. Still, Yellow’s loan request was approved.
Yellow’s bankruptcy administrators said they made the federal government one of the first creditors to receive repayment — including interest — after completing an auction of Yellow’s highly valued terminals and rolling stock.
The U.S. Bankruptcy Court for the District of Delaware on Jan. 12 approved the sale of 23 terminal leases owned by Yellow to six bidders for an aggregate $82.89 million. That followed sale of 128 freight terminals owned by Yellow for a combined $1.88 billion.
Yellow used proceeds from that sale to repay $700 million in principal—and more than $151 million in interest — to erase its debt to the federal government. The Treasury Department also received 29.6% of Yellow’s stock, totaling 15.9 million shares, in return for the $700 million loan. Treasury’s equity stake is worth about $72 million, Yellow said.
“This repayment demonstrates Yellow’s absolute commitment to fulfilling its promise to the American taxpayers that its CARES Act loan would be repaid in full with interest,” Matthew Doheny, Yellow’s chief restructuring officer said in a statement.
“At the time the loan was made, the U.S. supply chain was in danger of collapse and Yellow was proud to have secured its CARES Act loan, which helped Yellow preserve its 30,000 jobs, protect the U.S. economy during the height of the Covid crisis and ensure that our brave men and women in uniform continued to receive the supplies they needed to defend our great nation.” Doheny added.
Doheny added, “Despite receiving bipartisan support, Yellow's CARES Act loan would not have been possible without the leadership of (ex-) President (Donald) Trump and Secretary (Stephen) Mnuchin for which Yellow is and remains grateful.”
Yellow's counsel, Marc E. Kasowitz, said between July 2020 and October 2022, the CARES Act loan helped Yellow make “significant progress” executing its strategically vital fleet and network modernization efforts that would have enabled Yellow to compete against the non-union carriers that dominate the industry.
“All of that progress, however, was destroyed when the International Brotherhood of Teamsters (IBT) leadership, under the direction of Sean O'Brien, took a militant zero-sum approach to dealing with Yellow that prevented Yellow from completing its network optimization.”
According to Kasowitz, “Just as Yellow kept its promise to the American taxpayers by repaying its CARES Act loan in full, so too will Yellow keep its promise to the 30,000 former Yellow employees who lost their good-paying jobs by seeking redress from the IBT for causing Yellow's bankruptcy as detailed in Yellow's breach of contract lawsuit against the IBT.”
