Teamsters Call for Bankruptcy Reform as Estes Wins Yellow Stalking Horse Bid
Estes Express Lines has been named as the stalking horse bidder for Yellow Corp.’s nearly 170 terminals, with a Delaware bankruptcy court judge approving the bid Thursday.
Estes’ $1.525 billion bid sets the floor price for Yellow’s terminals in the event of a bankruptcy auction. This means the bankrupt less-than-truckload (LTL) company can accept offer than the Estes price as the process unfolds. A hearing to announce the stalking horse bid was scheduled for Friday, but that meeting was cancelled Thursday when the judge approved the Estes bid.
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The deadline to bid for the terminals is Nov. 9, and the auction is scheduled for Nov. 28 if needed. Bid protections for Estes were also approved, including a $7.5 million breakup fee and expense reimbursement up to $1.6 million.
Estes set the table in August when it placed the initial $1.3 billion stalking horse bid, before Old Dominion came in hot with a $1.5 billion offer.
At a hearing held last Friday, Yellow attorney Allyson Smith cited high interest for the service centers. They’re fetching two to 11 times their appraised value. Counsel for Yellow also said at the hearing that the proceeds from the terminal sales should be more than enough to repay secured creditors.
But before bidding for the terminals begins, the future of Yellow’s rolling stock of roughly 11,700 tractors and 35,000 trailers still needs to play out. Yellow has set an Oct. 13 bid deadline for those assets, and an Oct. 18 auction will follow as needed.
The winning stalking horse bid comes as Yellow is under fire from the Teamsters union, which represented 22,000 of the trucking company’s employees who lost their jobs when the firm closed down.
The union has called on Congress to investigate Yellow’s insolvency as part of its appeal for U.S. bankruptcy reform. It wants new regulations to protect existing collective bargaining agreements. It also wants a guarantee that contracts will be honored even after a company goes bankrupt.
At a Senate Judiciary Committee hearing addressing corporate manipulation of Chapter 11 bankruptcy codes, Sen. Amy Klobuchar (D-Minn.) called out Yellow, saying that the company tried to quickly liquidate assets to avoid taking responsibility for mismanagement at the expense of workers.
“After a company files for Chapter 11, employees risk losing their livelihoods, health benefits, and pensions through no fault of their own. These are things that workers have worked hard for and have earned,” Klobuchar said during the hearing, noting that 480 Minnesota Teamsters were affected by the collapse.
The Teamsters, which won a massive contract for 340,000 UPS workers in July, claim that the fast-moving bankruptcy and liquidation warrant scrutiny because this might deter a potential buyer who could be interested in re-starting Yellow instead of simply picking at the remains.
“More disturbing details of corruption, greed and graft continue to emerge at Yellow. We call upon Senator [Bernie] Sanders and Senator [Dick] Durbin to begin hearings,” said Sean O’Brien, general president of the Teamsters, in a statement. “Workers in this country need real protections against corporations who game the system. We need real reform now that puts workers first in this process.”
O’Brien referred to Yellow’s approval of $4.6 million in executive retention bonuses to eight current and two former executives before the company filed bankruptcy. The trucking company made these payouts despite skipping out on a $50 million payment for union employee healthcare and pension benefits.
This is why the Teamsters want Congress to establish legal safeguards protecting earned pension credits and retirement benefits and ensuring workers get the severance they’re owed.
The union’s general secretary-treasurer, Fred Zuckerman, claimed that the Teamsters conceded more than $5 billion in wages and benefits cuts over the past 14 years “to keep Yellow in business.”
The contentious relationship between the Teamsters and cash-strapped Yellow took a hard turn in June when the LTL business sued the union for $137.3 million. The trucking company alleged that the union had sabotaged it from implementing its One Yellow restructuring plan, namely by rejecting proposed changes and not agreeing to meet on the matter.
Retail businesses like Walmart and The Home Depot had started to divert their freight from Yellow as labor tensions ramped up. And when the Teamsters threatened to strike, clients gave their business to rivals including Estes, Old Dominion, FedEx Freight, XPO and others.
Yellow dodged a strike by making the payments, but the damage was already done, forcing the Chapter 11 bankruptcy.
