Yellow asset sales, bankruptcy financing approved

A tidy unwind of Yellow Corp.’s estate appears on track, a Friday hearing in a Delaware bankruptcy court revealed.

Counsel for Yellow said all objections for the asset bidding procedures, the debtor-in-possession (DIP) financing and the use of cash collateral to fund the wind down have been resolved. Judge Craig Goldblatt approved the orders.

Yellow attorney Allyson Smith, a partner at Kirkland & Ellis, said the asset sale process is “well underway,” noting “hundreds of interested parties” have executed confidentiality agreements to access the asset data room. A recent filing showed there were 120 indications of interest.

Less-than-truckload carrier Estes Express Lines is currently the front-runner for Yellow’s portfolio of 170 terminals. Estes entered a $1.525 billion stalking horse bid on Wednesday, surpassing a $1.5 billion bid from rival LTL carrier Old Dominion Freight Line (NASDAQ: ODFL).

Estes kicked off the process with a $1.3 billion initial bid.

A stalking horse bid sets a floor for valuation on assets to be sold in bankruptcy. Estes may not end up with all, or any, of the sites as it can still be outbid. The winning stalking horse bidder will be announced next week.

Smith said initial indications of interest for some of the service centers have been as high as two to 11 times appraised value. An auction (if needed) for the terminals has been set for Nov. 28. All bids have to be submitted by Nov. 9.

The proceeds from the terminal sales are expected to be more than enough to repay the company’s secured creditors.

She also noted “significant interest” in the rolling stock Yellow owns — roughly 12,000 tractors and 35,000 trailers.

Yellow’s position as a low-cost carrier was in part due to its inability to deliver freight on time and damage-free. It ran one of the oldest fleets in the industry as it struggled to generate the consistent profit needed to reinvest in the business. Many of its owned units are likely day cabs, which are typically used in pickup and delivery operations by an LTL carrier. Those tractors will garner lower proceeds than over-the-road sleeper cabs.

However, the company did use the second tranche of a Treasury loan to buy 2,400 tractors over a 15-month period, which included all of 2021. Those late-model units could bring in six figures while others in the fleet could be moved for as little as salvage prices.

The deadline for bids on the rolling stock is Oct. 13. If needed, an auction would occur on Oct. 18.

Yellow’s DIP financing package includes up to $212.5 million in funds from hedge funds Citadel and MFN Partners. Citadel is providing $100 million and MFN will initially provide $42.5 million with a potential delayed draw of up to $70 million.

The approved DIP package beat out a prior offer from Apollo Global Management (NYSE: APO), which was described as the only viable offer at the time Yellow filed bankruptcy. Citadel got involved when it acquired a $485 million term loan held by Apollo, which unloaded the debt when it became apparent another DIP deal would be chosen.

MFN acquired a more than 40% equity stake in Yellow during July. The firm is hoping to max out proceeds from a liquidation, leaving something for shareholders after secured and unsecured creditors’ claims are met.

Yellow recently added two directors to the board at the behest of MFN. The individuals were said to have “significant prior experience in restructuring transactions to maximize the value of the Company for stakeholders.”

The U.S Treasury also has a 30% equity interest in Yellow, which was part of a collateral package from a 2020 COVID-relief loan it provided to the company. It holds $737 million of Yellow’s debt.

Shares of Yellow will be delisted from Nasdaq on Monday. Trading was suspended on Aug. 16 and the shares have been trading over the counter since.

Pension fund withdrawal liabilities, which Yellow has said could equal more than $6.5 billion, will still need to be resolved along with Yellow’s lawsuit against the International Brotherhood of Teamsters in which it claims the union held up a proposed change of operations that would have saved the company.

At a Thursday meeting of creditors, Yellow CFO Dan Olivier said he didn’t know how much the withdrawal liability would equal and that the pension funds are the ones that make the calculations. He also acknowledged the receipt of a July retention bonus at the proceeding. Amounts paid to the company’s executives to stay on to wind down the estate have been reported to equal $4.6 million. Prior filings around the bankruptcy petition date referenced that payments were made.

The judge heaped praise on counsel from all parties for reaching an orderly resolution.

“The degree of cooperation and good work combined with all of the parties’ ability to harness market forces for the benefit of the estate seems to be exactly what’s contemplated by the process and I am extremely impressed with all of the cooperation and good work,” Goldblatt concluded.

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