After decades of struggling financially and each time pulling through, Yellow ceased operation July 30, and over the weekend filed for Chapter 11 bankruptcy protection.
The shutdown and now bankruptcy filing by the less-than-truckload provider comes on the heels of ongoing disputes between Yellow and the Teamsters Union, each blaming the other for the financial troubles.
Of the trucking company’s debt, a large chunk is owed back to the federal government in connection with a $700 million CARES Act loan that Yellow (then operating as YRC Worldwide) received during the Covid-19 pandemic in 2020. The Wall Street Journal reports that Yellow CEO Darren Hawkins pledged in court Sunday for the business to fully repay that loan. In exchange for that pandemic-era loan, the federal government received a 29.6% equity stake in the company.
How much of that loan can be repaid likely hinges on what money Yellow can generate from the sales of assets, both real estate and rolling stock.
Yellow owns, as reported in the company’s 2022 annual report, 166 transportation service facilities. Of the company’s largest 10 service facilities ranked by number of doors, seven were owned and just three were leased.
According to that same report, Yellow owned 12,700 tractors and about 34,000 trailers. Analysts report much of the fleet is older, with some tractors approaching 20 years of service.
Why is Yellow Pursuing Liquidation?
Investment advisory firm Stifel, following Yellow’s ceasing operations, had predicted that the bankruptcy would be done as a liquidation rather than a restructuring.
In an interview with HDT, Bruce Chan, director and senior analyst at Stifel, provided several reasons:
- Unlikely there would be buyers in the LTL market interested.
- There would only be a small pool of potential buyers outside LTL.
- The company was deeply distressed financially.
The Market and Jobs Impact of Yellow's Closing
Chan said there is currently enough spare capacity, 15 to 20%, in the LTL market so the other players absorb the available business. He also says he expects rates to increase, in particular for companies that had been shipping at Yellow’s lower rates.
Yellow’s closing leaves about 30,000 people out of work, with 22,000 of those jobs held by union members. The American Trucking Associations is responding to that large number of displaced workers by allowing those employees to access a database to help them find other jobs in trucking.
“Yellow’s closure is a substantial blow to America’s economy and the company’s 30,000 hardworking employees and their families in all 50 states,” the ATA said in a press release. “Our message to former Yellow employees is that we want them to remain a part of the industry that they have done so much to build and strengthen. That is why the ATA is launching a new portal to connect former employees with prospective employers who are eager to utilize their unique and in-demand skills and experience."
What Went Wrong?
The Wall Street Journal posted an explainer video of "how ballooning debt and a standoff with the Teamsters union led to Yellow's downfall:"
History of Financial Struggles
Through the years, HDT has documented many of the key transactions, financial troubles, or other activities of YRC Worldwide/Yellow. Some of those highlights include:
- Report Questions Yellow CARES Act Loan
- U.S. Treasury Gets a Stake in YRC as Part of $700 Million Loan Deal
- YRC Looking to Wall Street for Dollars to Help Pay Debt
- YRC Worldwide Looking to Borrow More Than $1 Billion to Stay Afloat
- Bloomberg: YRC Back at the Brink?
- YRCW Completes Restructuring Plan
- YRC Avoids Bankruptcy Filing
- Analyst Looks at YRC's Bankruptcy Potential