Yellow Terminals Draw $1.3 Billion Bid
Yellow Corp.’s most valuable assets may soon be under new ownership.
Less-than-truckload (LTL) trucking firm Estes Express Lines has submitted a $1.3 billion bid to acquire the bankrupt company’s 166 owned terminals, Yellow attorneys said at a Thursday bankruptcy hearing in a Delaware federal court.
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The “stalking horse” bid sets a floor price for Yellow’s portfolio of terminals and does not constitute a sale. Other companies can still place higher bids at a court-supervised auction at a later date.
“Estes felt it was important to try to bring a proposal to the Yellow bankruptcy estate and its creditors that would add some value for the benefit of all case constituents and reduce some of the uncertainty surrounding this bankruptcy process,” Estes said, noting that “much needs to play out in this case.”
For Yellow, the floor bid would go a long way to paying off debt that reached $1.22 billion, according to the company’s Chapter 11 petition. That financial obligation includes a $737 million balance with the U.S. Treasury, including interest, stemming from a controversial Paycheck Protection Program (PPP) bailout in 2020.
The Richmond, Va.-based trucking company opted to bid on the terminals, but did not provide the $230 million loan it had initially floated to Yellow’s bankruptcy lawyers last week.
Adding new terminals would strengthen Estes’ footprint across the U.S.—though one supply chain expert believes the billion-dollar bid might be a bit too aggressive.
“It struck me as a bit odd that Estes with their 230 terminals would be interested in acquiring Yellow’s terminals,” said Dr. Tom Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute. “Yes, those terminals would be among the most valuable assets on Yellow’s books, along with the 12,000 power units, but I question whether Estes really needs them.”
Goldsby pointed out that Estes is already a national business operating in all 50 states, with 20 terminals in California and six in Tennessee.
“It seems as though they have blanketed the nation,” Goldsby told Sourcing Journal. “However, if they believe that they are going to increase volumes, it is reasonable to think that they would need to increase capacity, even if it is redundant in their terminal markets. It is certainly encouraging to see a buyer step up so quickly to liquidate those assets. I’m sure that Yellow’s creditors are happy to see that.”
Sourcing Journal reached out to Yellow for comment.
The terminal bid wasn’t the only news to come out of the hearing. On the financing front, the trucking giant struck an agreement in principle on the terms of a bankruptcy loan with hedge funds Citadel and MFN Partners, with the latter now its largest shareholder.
Citadel, which acquired $485 million of Yellow’s debt from Apollo Global Management and other lenders ahead of Thursday’s bankruptcy hearing, is offering to extend Yellow $100 million in a debtor-in-possession (DIP) financing.
Plus, MFN is offering to provide Yellow a $42.5 million DIP loan to fund its liquidation, but the hedge fund could extend another $70 million if the insolvent LTL company needs more cash in the future. MFN, which also holds a stake in LTL rival XPO, acquired a 42.5 percent stake in Yellow after the company shuttered operations.
With the DIP loan in place, Yellow has a 180-day period to solicit higher bids for its real estate assets, and also sell its trucking fleet.
Yellow stock was delisted from the Nasdaq Wednesday.
Whether Estes clinches the terminal base is still yet to be determined. However, it would give the company a leg up in the market for space as incumbents look to grow their share.
Jason Miller, interim chairperson, department of supply chain management at Michigan State University’s Eli Broad College of Business, told Sourcing Journal ahead of the bid that concentration issues are still not a major concern within the LTL landscape.
“Interestingly enough, Yellow’s failure may actually reduce industry concentration in the LTL sector to the extent that FedEx Freight and Old Dominion take on less of Yellow freight than the smaller players,” Miller said.
As a private company, Estes hasn’t issued updates about shipments the way its competitors have, but it has likely seen volumes increase.
ArcBest reported a more than 10 percent increase in core LTL rated shipments per day in the last week of July when compared to the same week in June, while TForce Freight saw month-over-month shipments increase 13 percent in July. And in the first two weeks of August, Saia said it saw a 13 percent year-over-year increase in shipments.
