Yellow Corp., a longstanding figure in the American trucking industry, has hit a dead end. The company recently made the difficult decision to shut down its operations, leaving the field open for other players in the less-than-truckload market to seize new opportunities – and quite possibly acquire valuable assets like freight service facilities.

After nearly a century in business, Yellow Corp. officially halted the acceptance of new shipment orders on Friday and made its bankruptcy filing public. The company’s operations came to a complete halt on Sunday, with notices sent out to both customers and employees confirming the end of the road.

According to the Wall Street Journal, Yellow Corp. informed the Teamsters union of its intent to file for bankruptcy, solidifying the company’s unfortunate and final chapter.

Yellow and the Teamsters

According to Yellow’s 2022 Annual Report, they had a workforce of around 30,000 employees by the end of December 2022. Out of this number, 24,000 were union employees. The company’s annual report also revealed that salaries, wages, and employee benefits for both union and non-union workers made up more than 50% of the company’s operating costs.

“Today’s news is unfortunate but not surprising,” said Teamsters General President Sean O’Brien in a press release. “Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry,”

Yellow did not agree with this assessment and in a mid-July press release stated, “Teamsters General President Sean O’Brien has blamed Yellow for failing its workers, but it is the Teamsters’ leadership who has failed the 22,000 Teamsters employed by Yellow as well as the 8,000 non-union employees who may soon become the Teamsters’ collateral damage.

“For many months, Teamsters’ leadership has steadfastly refused to negotiate the company’s long-planned and necessary modernization effort that would enable Yellow, a 100-year-old company, to streamline and strengthen its operations to compete against non-union carriers.”

Investment advisory firm Stifel has recently addressed the ongoing dispute with Teamsters in an email to the investment community. This dispute has had significant implications for Yellow, as it has prevented them from refinancing almost $1.5 billion in debt with upcoming maturities. Stifel has stated in a press release that it is likely that Yellow will file for liquidation rather than reorganization.

A report by Fox Business reveals that a substantial portion of Yellow’s debt, $729.2 million to be precise, is owed to the federal government.

Previously known as YRC Worldwide, Yellow received a $700 million loan in 2020 through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This loan was justified on the grounds that Yellow’s military moves were of national security importance. Out of a total of $735.9 million in national security loans provided by the Treasury to 11 businesses, Yellow received approximately 95% of the total value.

It is worth noting that the CARES Act loan also included a provision stating that the U.S. Treasury would hold a 29.6% equity stake in the company.

Given Yellow’s troubled financial history, the substantial loan they received raised concerns and prompted inquiries from the Congressional Oversight Commission, as previously reported in 2021.

YRC Freight Canada

Unifor Local 4209 has issued a directive instructing its members to stay home and not report to work at YRD+C Freight Canada, a division of Yellow. This action impacts 58 owner-operator truck drivers and 70 company linehaul drivers.

“The news is devastating for our members,” said Don Lajoie, president of Local 4209. “While the bankruptcy process focuses on moving numbers around a page, we have to remember the human impact. There are hundreds of families who are left with very little information right now. The Local and National union are working to keep them informed as the process continues.”

Yellow’s Bankruptcy Outlook

Stifel’s report states that none of the LTL companies that have filed for bankruptcy since 1980 have done so with the intention of reorganizing. Instead, these bankruptcies have resulted in liquidation.

Stifel believes that the Yellow bankruptcy will also lead to liquidation for the following reasons:

• It is unlikely that there will be interested buyers in the LTL industry.
• The potential pool of buyers outside of the LTL sector would be limited.
• The company is in a state of severe distress and its value as a functioning business would be lower than if its assets were sold off.

What this Means for the Market

Stifel analysts predict that Yellow’s freight, which currently consists of over 40,000 shipments per day, will be redistributed among other LTL carriers within the trucking industry.

According to the analysts, most carriers have 20% space capacity, and the closure of Yellow will result in more freight being shifted to carriers that offer competitive pricing. Additionally, long-haul trucking companies will absorb the portion of Yellow’s business that involves long-haul shipments.

Yellow’s Assets

Yellow has a network of 308 service facilities in North America. Of these facilities, 166 are owned by Yellow and 142 are leased. Together, they provide 19,100 freight servicing doors, with the smallest facility having three doors and the largest having 426. The top 10 facilities, ranked by number of doors, have a total of 2,520 doors, with seven owned by Yellow and three leased.

According to a Stifel analyst, there are opportunities for competitors to upgrade to larger facilities and for well-capitalized LTLs to acquire terminals.

Yellow’s fleet consists of 12,700 tractors and approximately 42,000 trailers. At the end of 2022, the company owned 11,700 tractors and leased 1,000. Yellow owns 34,800 trailers and leases 7,200.

In April 2021, Yellow placed an order for 1,222 Peterbilt Model 579s, the largest single-year order Peterbilt had ever received for trucks with the Paccar powertrain, Paccar MX engine, and TX-12 transmission. Yellow experienced growth in the first quarter of the same year, with over 1,100 tractors, 1,600 trailers, and 140 containers being delivered.

A History of Struggles

Yellow, formerly known as RYC, has faced various challenges over the years, particularly in terms of its operations and finances. Here are some key examples:

• In January 2014, YRC Worldwide, the parent company of YRC Freight, sought to borrow $1.15 billion in order to refinance debt.
• In December 2013, YRC attempted to raise around $29 million by selling three million shares of stock to repay over $69 million of upcoming debt.
• In March 2012, YRC was reported to have an “87% chance of default” by Bloomberg Businessweek.
• In August 2013, YRC Worldwide recorded a quarterly loss and had only $219 million in cash, despite being $1.3 billion in debt.
• YRC Worldwide successfully executed a $500 million restructuring plan in order to inject new capital, enhance liquidity, and reduce debt. This included the appointment of a new CEO and board of directors in 2011.
• In January 2010, YRC Worldwide averted potential bankruptcy by engaging in a debt-for-equity exchange with bondholders, securing approximately $470 million in par value.

Attempting to Sell Logistics Branch

Yellow Corporation announced in a press release on July 27th that it is considering selling its third-party logistics broker, Yellow Logistics, Inc. The company is currently in talks with various potential buyers and the discussions are progressing.

Source: Trucking Info