The Yellow bankruptcy filing in a Delaware court lists estimated assets and liabilities of $1 billion to $10 billion and creditors of more than 100,000. One of the largest U.S. trucking companies Yellow Corp (YELL.O) filed for Chapter 11 bankruptcy protection on Sunday, burdened with a heavy debt load after a series of mergers and following tense contract negotiations with the Teamsters Union.
Trump administration support for YRC debt
A pandemic-era lifeline that the Trump administration predicted would turn a profit for the federal government failed to keep Yellow afloat.
Three years after receiving a $700 million pandemic-era lifeline from the federal government, the struggling freight trucking company Yellow bankruptcy was filled.
After months long negotiations between Yellow’s management and the Teamsters union broke down, the company shut its operations late last month, and said on Sunday that YRC seeks bankruptcy protection so it can wind down its business in an “orderly” way.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” Yellow’s CEO, Darren Hawkins, said in a statement.
Yellow bankruptcy
Yellow, formerly called YRC Worldwide, is one of the largest U.S. trucking companies and a dominant player in the “less-than-truckload” (LTL) segment that hauls cargo for multiple customers on a single truck.
YRC Worldwide received the $700 million loan during the summer of 2020 as the pandemic was paralyzing the U.S. economy.
Yellow’s bankruptcy filing comes after Teamsters Union said late last month that it was notified that the company was ceasing operations.
The company has been in contentious negotiations with the union over an internal restructuring initiative meant to boost efficiency.
Struggles of one of the largest U.S. trucking companies
The company’s struggles compounded with a steep drop in ecommerce shipments from early pandemic highs and an industrywide decline in freight volumes over the last year.
Yellow, saddled with liabilities from its purchases of Roadway in 2003 and USF in 2005, reported total debt of $1.5 billion last year, as per report.
U.S. taxpayers face potential losses if the company does not repay a $700 million-loan the administration of former President Donald Trump issued to bail out the long-troubled and poorly managed YRC debt in 2020 under a pandemic relief program.
Since then, Yellow changed its name and embarked on a restructuring plan to help revive its flagging business by consolidating its regional networks of trucking services under one brand. As of the end of March, outstanding YRC debt was $1.5 billion, including about $730 million that it owes to the federal government. Yellow has paid approximately $66 million in interest on the loan, but it has repaid just $230 of the principal owed on the loan, which comes due next year.
The fate of the loan is not yet clear. The federal government assumed a 30 percent equity stake in Yellow in exchange for the loan. It could end up assuming or trying to sell off much of the company’s fleet of trucks and terminals.
The White House did not respond to a request for comment ahead of the Yellow bankruptcy filing, and the Treasury Department declined to comment.
Effect of Yellow bankruptcy filling
YRC bankruptcy could create temporary disruptions for companies that relied on Yellow and might prompt more consolidation in the industry. It could also lead to temporarily higher prices as businesses find new carriers for their freight.
It lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it defrauded the federal government during a seven-year period. Last year it agreed to pay $6.85 million to settle the lawsuit.
YRC Worldwide customers
Customers include large retailers such as Walmart (WMT.N) and Home Depot (HD.N), manufacturers and Uber Freight. Some have paused shipments to the company on fears they could be lost or stranded if the YRC bankruptcy was declared.
