When Yellow abruptly closed operations in the summer and filed for bankruptcy, few thought a buyer would emerge and attempt to revive the long-troubled transportation giant.
Now, a prominent trucking executive has drawn up a last-minute plan to bail Yellow out of bankruptcy, a proposal that seeks not only to rehire many of the company’s employees but also to work with their union, the International Brotherhood of Teamsters. , to create a healthy society. business.
The plan is based on getting the Treasury Department to allow Yellow to postpone repayment of a $700 million bailout loan it gave the company in 2020. The Treasury may not accept the plan because there are legal obstacles to extend the loan. And it will be paid sooner under the plan Yellow already filed in Delaware bankruptcy court, which involves selling the company’s terminals and other assets to raise hundreds of millions of dollars in cash. Some transportation analysts say reviving Yellow will be difficult because many customers will have switched to other transportation companies that are much better managed than the old Yellow.
But Sarah Riggs Amico, the transportation executive who led the deal, said only that her plan could bring back thousands of jobs, adding that she had the experience to build a more efficient company in partnership with the Teamsters and assemble an executive team that can bring back customers. .
“Yellow’s restructuring provides the opportunity to restore tens of thousands of fair-wage, unionized truck driving jobs while strengthening America’s supply chain,” said Ms. Riggs Amico, CEO of Jack Cooper , a private automobile transport company. “Who wouldn’t find it a worthy effort?”
Under the proposal, Riggs Amico’s group would extend the Treasury loan to be repaid in 2026 instead of next year, according to a person familiar with the offer. The group would also borrow $1.1 billion to pay other secured creditors and bankrupt lenders, and provide the new company with cash to operate. And it would issue $1.5 billion in preferred stock to unsecured creditors (the largest of which is the Central States Pension Fund) who do not get all of their claims paid in bankruptcy. Under the plan, the Central States fund would get about $500 million from the preferred stock, far less than the $4.8 billion Yellow owes it.
Ms. Riggs Amico’s offer was sent to Yellow’s address on Tuesday. The company must now consider whether to accept the offer. An auction to sell Yellow’s assets was scheduled to begin on Tuesday, possibly lasting several days. Yellow did not respond to requests for comment.
Riggs Amico and other female executives would own 51 percent of the new company, which would be separate from Jack Cooper. The new Amarillo plans to employ about 15,000 people, according to the person familiar with the plan, up from 30,000 earlier this year.
“The Teamsters have a framework agreement to lay the foundation for good union jobs, fair wages and strong benefits once a new company is established,” Teamsters spokesperson Kara Deniz said in a statement.
Government labor market data suggests that about 10,000 yellow employees have found work elsewhere, said Avery Vise, vice president of trucking at FTR, a forecasting firm that focuses on the freight industry.
This implies that around 20,000 Yellow employees are still looking for work. “I have a lot of friends who are still unemployed,” said Mark Roper, a former yellow driver from McDonough, Georgia, who found work at another trucking company. “I have a lot of friends who are about to lose their home.”
While restoring lost trucker jobs and resurrecting a unionized company may seem like attractive goals for the labor-friendly Biden administration, Treasury may not believe it has the legal authority to extend the loan — it was granted under the Act CARES, approved to provide relief. at the beginning of the pandemic, and may have qualms about continuing to support a company that has struggled for years.
“There is no clear authority for Treasury to compromise the claim in any way that does not maximize returns to the U.S. government,” said Adam Levitin, a law professor at Georgetown University who specializes in bankruptcy.
In a statement, a Treasury spokesperson said: “Treasury is one of several creditors involved in the bankruptcy process. “We will continue to work to ensure taxpayers, affected workers and their families are treated fairly.”
Thomas Nyhan, chief executive of the Central States Pension Fund, said Sunday that the fund was trying to determine the financial benefit of each plan as the terms of the bailout attempt changed. And he said there may be a legal hurdle: The Employee Retirement Income Security Act generally prevents a pension fund from owning securities issued by companies that contribute to the fund (the preferred stock under the Yellow bailout plan), although there may be exemptions. “This is a very complicated problem,” Nyhan said. “We have not reached a conclusion, mainly because the agreement continues to evolve.”
Members of Congress from both parties have written to Treasury, urging it to consider expanding its borrowing, including Sens. Josh Hawley, R-Mo., and Elizabeth Warren, D-Massachusetts. Hawley wrote this month that assisting Yellow’s sale to an acquirer was “a common-sense step to keep Yellow’s trucks on the roads and keep its workforce gainfully employed.”
The Treasury loan came from a pool of money to help companies designated as crucial to national security. It came under scrutiny because of ties between Yellow and the Trump administration, and because the Justice Department had sued the company. accusing him of overcharging the Department of Defense for transportation services. Yellow agreed last year pay a fine of 7 million dollars to resolve the case.
Yellow was a major player (another is Old Dominion) in the less-than-truckload sector, in which a truck carries goods for more than one customer. Companies in the sector typically have a network of terminals and warehouses to store goods between shipments and typically travel shorter distances than truckload companies, whose vehicles transport goods for a customer over longer distances.
Analysts say Yellow underperformed because it failed to effectively integrate large acquisitions and because it had higher costs, which some attribute in part to the unionization of its workforce.
Mrs. Riggs Amico, a Democratic candidate in the Georgia primary For the United States Senate in 2020, he has experience restructuring Teamster transportation companies. He oversaw Jack Cooper’s acquisition of two auto transport companies with Teamster workforces, and his plan for Yellow calls for hiring executives who specialize in the less-than-truckload business. (Jack Cooper, whose employees belong to the Teamsters, filed for bankruptcy in 2019.)
Some of Yellow’s rivals are interested in taking over its terminals under the Delaware bankruptcy court’s current plan. Estes Express has submitted a stalking bid (a bid intended to set a floor price for the assets) of $1.53 billion for Yellow’s shipping centers. That sum would provide enough cash to pay the Treasury and a secured loan of about $500 million now held by Citadel, a Wall Street firm.
Ms. Riggs Amico’s plan would write off Citadel but ask the Treasury to extend its loan. Some experts say this would mean taxpayers would be taking a backseat to Wall Street.
“It’s helping private parties make money from an investment in distressed debt, and there’s no real reason for the Treasury to do that,” said Levitin, the Georgetown professor.
Citadel declined to comment.
In Congress, those open to Riggs Amico’s offer acknowledge that other creditors would preempt the Treasury, but believe the compromise is a necessary evil to save jobs.
But it’s unclear whether there would be much room left for a resurrected Yellow. Trucking experts say the market is gradually grappling with the loss of the company, which once accounted for about 12 percent of drivers in the less-than-truckload sector. Vise, the trucking analyst, said Yellow’s departure had driven up trucking rates as customers struggled to find other carriers. But he hopes the sector will recover soon.
“The closure of Yellow did not seriously affect the less-than-truckload market,” he said.