‘All Kinds of Financial Shenanigans’: Yellow’s Drama Lures Private Equity Powerhouse
Yellow Corp. may be on death’s door, but the less-than-truckload (LTL) company may be hoping a new cash infusion could give it a second wind.
Creditors led by Apollo Global Management are nearing a deal to provide the debt-laden trucking company with fresh cash during an impending bankruptcy, according to Bloomberg. The amount has not been disclosed.
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Even with new capital, the company’s ability to operate without needing to liquidate much of its assets still remains in doubt.
“There appear to be all kinds of financial shenanigans going on around Yellow now—none of which have anything to do with bolstering its potential as a viable trucking company into the future,” said Dr. Tom Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute.
The company has yet to officially file for bankruptcy, and hasn’t denied the Teamsters report saying it shut down on Sunday. Yellow has to pay nearly $1.3 billion of its $1.5 billion in debt due next year.
Its owes $729.4 million, more than half the total due in 2024, to the U.S. Treasury, which owns roughly 30 percent of the trucking company in exchange for a $700 million Paycheck Protection Program (PPP) loan.
Yellow declined to comment. Sourcing Journal also reached out to Apollo.
One expert believes the hedge fund stepping in isn’t exactly good news.
“Those of us in the logistics business start to write off companies when hedge funds come around looking for a deal,” Goldsby said. “Generally speaking, they do not understand the industry and are simply looking for arbitrage opportunities. As a case in point, MFN Partners has acquired more than 40 percent of Yellow’s stock over the past three weeks as a way to hedge their holdings in one of Yellow’s chief rivals, XPO. If Yellow were to survive, they’d do well with the cheap Yellow holdings. If Yellow folds, their XPO stock will continue on a robust path—or so goes the theory.”
Yellow’s last official message came out Thursday, when it said it was looking for someone to buy its non-union, third-party logistics (3PL) subsidiary, Yellow Logistics. Multiple media reports suggest the Yellow Corp. has laid off all 30,000 employees as part of the shutdown.
Apollo is well-positioned to provide backing and is finalizing a deal to lead a debtor-in-possession (DIP) financing for the cash-strapped trucking company, Bloomberg reported. Talks related to the financing are not final.
It isn’t clear how much cash Yellow has remaining, but it believed to be well below the $100 million it reported as of June 30. Investment bank Stephens estimated that by late July the company was burning through $9 million to $10 million per day.
The losses mounted as the Teamsters threatened to go on strike because Yellow missed a $50 million pension payment. Although a strike was averted, the company saw freight flee its network as many of its customers worried Yellow would soon go out of business.
The Teamsters represent 22,000 of Yellow’s employees.
This isn’t the first time Yellow has had to reorganize. The trucking firm once skirted bankruptcy by negotiating a debt-for-equity deal with creditors in December 2009. Before that, Yellow, then known as YRC Worldwide, had to restructure its business to narrowly avoid bankruptcy in 2011.
Yellow could still sell off more assets in a last-ditch effort to generate cash. In February, Yellow Corp. CEO Darren Hawkins said the company planned to sell 17 terminals that have overlapping service territories, but has only sold one terminal in the time since, in Compton, Calif. for $80 million.
In light of Yellow’s problems, American Trucking Associations (ATA) created a new database to help former employees find new jobs within the trucking industry.
“The past several days have been especially difficult for drivers, dock workers, mechanics, salespeople, administrative and support personnel, and other employees, many of whom dedicated decades of their careers to the company,” said ATA president and CEO Chris Spear, in a statement. “Yellow personnel earned a well-deserved reputation as being professional and solution-oriented, helping countless customers to seamlessly navigate the complexity of logistics to ship their products on time virtually anywhere in the country.”
