New $1.525 Billion Bid Revs Up Yellow’s Blockbuster Bankruptcy
Estes Express Lines isn’t going down without a fight in the battle for Yellow’s terminals.
The Richmond, Va.-based less-than-truckload (LTL) trucking company placed a new $1.525 billion stalking horse bid for the bankrupt freight giant’s 166 terminals, outpacing the prior $1.5 billion bid from sector rival Old Dominion. Estes made a $1.3 billion offer in August to kick off the bidding war.
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In a filing, Nashville, Tenn.-based Yellow described the Estes offer as the best available and asked the court to rule on the issue by Sept. 22 to avoid the risk of it being withdrawn.
The new Estes bid sets a new floor price for the Yellow terminals. A hearing scheduled for Friday will approve bidding procedures and solicit more offers.
Yellow is also expected to sell off its rolling stock at the auction, including 11,700 trucks and 36,000 trailers, lawyers for Yellow said. An auction for the vehicles is scheduled for Oct. 18.
George Singer, a bankruptcy attorney and corporate finance partner at law firm Holland & Hart, who’s not involved in the Yellow case, said the pre-auction competition should “portend well for value and the auction process itself” ahead of the next hearing.
“The company is proposing a flexible process by which bidders can bid on real estate assets and rolling stock assets,” Singer told Sourcing Journal. “The stage is set for multiple bids, but it would surprise me if there would be any additional bidding in advance of tomorrow’s hearing certainly. It would equally surprise me if the auction itself did not produce additional bids from at least the two main bidders that have stepped forward publicly already.”
Sourcing Journal reached out to Estes and Yellow for comment.
Estes’ offer includes more favorable terms aside from the bid itself, including “substantially below market” bid protection fees, Yellow stated in a filing Wednesday. This is the fee that Yellow would pay if an offer falls through. The Estes offer includes up to $9.1 million in bid protections, or a $7.5 million breakup fee plus up to $1.6 million in expense reimbursement.
Yellow would have to pay $28 million total under the terms of Old Dominion’s bid.
Yellow noted that standard costs “routinely approved by bankruptcy courts” of a 3 percent breakup fee and 1 percent expense reimbursement would mean it would pay usually $61 million on a deal valued at $1.525 billion. This is what makes Estes’ terms so attractive.
As expected, Yellow’s assets have drawn considerable attention. The company said in the filing that 540 prospects have reached out, while 307 have struck confidentiality agreements to evaluate the assets.
The terminals have always been the white whale of sorts, as additional real estate broadens a trucking business’ network. But there aren’t many companies with the firepower to bid for all of Yellow’s real estate assets.
Jason Miller, interim chairperson, department of supply chain management at Michigan State University’s Eli Broad College of Business, told Sourcing Journal last month that FedEx Freight and XPO were the only other competitors with the resources to submit a bid. And even then, he said FedEx’s reorganization makes that even less likely.
Yellow halted operations on July 30 and filed for bankruptcy early last month, blaming the Teamsters union for preventing the company from moving forward with its restructuring plan, One Yellow. At Yellow’s creditors meeting on Thursday, companies like BSNF Railway, Amazon and The Home Depot were able to ask questions about Yellow’s financial standing.
Yellow is hping to repay its largest creditors, including the U.S. Treasury, which owns roughly 30 percent of the trucking company in exchange for a $700 million pandemic-era Paycheck Protection Program (PPP) loan. Including interest, Yellow owes roughly $730 million, which the company would be able to recoup if Estes’ floor bid is successful.
Friday’s hearing should bring about the final approval of the $142 million in debtor-in-possession (DIP) financing Yellow has gotten from hedge funds Citadel and MFN Partners, now its largest shareholder.
Judge Craig Goldblatt, who is overseeing Yellow’s bankrupty, is expected to finalize a motion that would grant approximately $24.5 million in outstanding wage and benefit payments and roughly $1.9 million in severance payments to U.S. and Canadian workers who lost their jobs when Yellow shut down.
Ducera Partners, the investment bank Yellow hired as a bankruptcy advisor, threw its support behind the Estes bid.
“Based upon my professional experience and my personal knowledge of the debtors’ commercial circumstances and the marketing process of the assets…I believe that designating Estes as the stalking horse bidder for the acquired assets is in the best interests of the estates, and that the Estes bid protections were necessary to induce Estes’s stalking horse bid for the acquired assets,” said Cody Leung Kaldenberg, a partner at Ducera Partners, in a court filing.
