Senators Intervene in Bankrupt Yellow’s $700 Million Federal Loan
U.S. lawmakers are fighting to keep Yellow Corp. alive.
Eight U.S. senators asked the Treasury department to extend the maturity date for $700 million in loans that Yellow obtained under the CARES Act. This could help the bankrupt trucking company’s chances of attracting a “going concern” bid and saving some of the 30,000 jobs at stake, they claim.
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The controversial $700 million Paycheck Protection Program (PPP) loan, which Yellow got in 2020 in exchange for the government taking a nearly 30 percent stake in the company, has two tranches due Sept. 30, 2024. Lawmakers want to push back the due date to 2026. Under a going concern sale, a buyer would acquire all of Yellow’s assets so the trucking company could operate for the foreseeable future while maintaining its debt obligations.
On Thursday, Sen. Roger Marshall (R-Kan.) issued a letter to Treasury Secretary Janet Yellen stating that multiple parties want to place a going concern bid. Marshall reiterated many of talking points commonly repeated by the Teamsters, who represented 22,000 of the laid off employees and have called for bankruptcy reform in the wake of Yellow’s collapse.
Marshall referred to “utter mismanagement” at the less-than-truckload (LTL) firm, “even after Yellow’s union workers provided concessions with their own money and benefits to help the company reach financial stability.”
The senator acknowledged the difficulty in preserving all 30,000 jobs, but said “the alternative of leaving these workers by the wayside is unacceptable in our view.”
The Teamsters have said they voluntarily sacrificed more than $5 billion in wage and pension concessions to keep Yellow afloat for the past 20 years. Yellow filed suit against the Teamsters in June for breach of contract, with the trucking company alleging that the union prevented it from implementing the second phase of its One Yellow restructuring plan.
Yellow spiraled downhill in the weeks after as the Teamsters threatened a strike over $50 million in missed benefits and pension payments. Although a strike was avoided after the payment date was extended, major retail clients like Walmart and The Home Depot were among those who diverted freight from Yellow, ultimately accelerating the company’s demise before it shut down on July 30.
“Although competing companies can absorb much of the lost productivity from Yellow’s closure, consumers will likely suffer from the lack of competition. Since Yellow will be out of the less-than-truckload market, rates for competitors will likely increase, causing higher prices for LTL customers,” Marshall wrote. “Further, if this loan were to go through bankruptcy, $700 million worth of taxpayer dollars would be essentially wasted. A going concern bid would provide an ample opportunity to have this loan repaid and the taxpayers made whole again.”
Marshall’s letter came two weeks after seven other senators issued a joint letter to the U.S. Treasury on Oct. 6 calling for the PPP loan maturity to be extended. Signatories include Sen. Bernie Sanders (I-Vt.), Sen. Sherrod Brown (D-Ohio), Sen. Tammy Baldwin (D-Wisc.), Sen. Robert P. Casey Jr. (D-Pa.), Sen. Amy Klobuchar (D-Minn.), Sen. John Fetterman (D-Pa.) and Sen. Tina Smith (D-Minn.).
They argue that a going concern bid would expedite payments to creditors, including to taxpayers, while preserving jobs, “something that piecemeal, bifurcated bids would not do.”
In both statements, lawmakers cited precedent for the Treasury to request authority from the Department of Justice to modify loan terms under the Federal Claims Collection Act. When General Motors filed for bankruptcy in 2009, the Treasury asked the authority to accept stock from the automotive maker instead of cash to pay its debts.
Yellow is preparing to host auctions for its rolling stock of 12,000 trucks and 35,000 trailers, as well as for its nearly 170 terminals. The rolling stock bid deadline and auction have been extended from their original deadlines to an undetermined date. The deadline to bid for the terminals is Nov. 9, and the auction is scheduled for Nov. 28 if needed.
“The entire Teamsters Union is keeping a close eye on the proceedings in Delaware as the Yellow bankruptcy carries on, and we are extremely grateful for the support of these U.S. senators standing up for American workers seeking relief,” said Sean O’Brien, general president of Teamsters, in a statement. “With the assistance of the U.S. Treasury and the Justice Department, if a going concern bid is presented during this bankruptcy process, the Teamsters will do everything in our power to rebuild as many strong union jobs as possible in the less-than-truckload space that Yellow abandoned with its corporate recklessness. The battle for high-paying careers in American trucking is far from over.”
