Yellow Corp., the trucking company that received a $700 million loan from the U.S. government during the pandemic, filed for Chapter 11 bankruptcy protection on Sunday, August 7, 2023. The company said it expects to pay back its private and government loans in full by selling its assets and restructuring its debt.
Yellow’s Financial Troubles
Yellow, formerly known as YRC Worldwide, is one of the largest trucking companies in the U.S., with more than 30,000 employees and a fleet of over 20,000 trucks and trailers. The company provides less-than-truckload (LTL) services, which involve transporting small shipments from multiple customers on the same truck.
However, Yellow has been struggling for years with declining revenue, mounting losses, and heavy debt. The company faced fierce competition from other trucking firms, as well as regulatory hurdles, supply chain disruptions, quality issues, and customer complaints. The company also faced a lawsuit from the Justice Department, which accused it of overcharging the Defense Department and lying about it.
The pandemic worsened Yellow’s situation, as the demand for its services dropped sharply due to lockdowns and travel restrictions. The company was on the verge of collapse when it received a $700 million loan from the Treasury Department in July 2020, under a program to aid businesses critical to national security. The loan was controversial, as some lawmakers and analysts questioned Yellow’s eligibility and viability.
The loan was supposed to help Yellow survive the crisis and modernize its equipment. However, it was not enough to turn around the company’s fortunes. Yellow continued to lose money and market share, and faced more than $1 billion of debt coming due in 2024. The company also faced several lawsuits from shareholders who accused it of making false and misleading statements about its business prospects and financial condition.
Yellow’s Bankruptcy Plan
On Sunday, August 7, 2023, Yellow filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. The company said it had secured $200 million in debtor-in-possession (DIP) financing from a group of lenders led by Apollo Global Management Inc., which will allow it to continue its operations while it restructures its debt and seeks a buyer or a partner.
Yellow said it had reached an agreement with most of its creditors to reduce its debt by more than 80% through a debt-for-equity swap. The company also said it had received interest from several potential strategic and financial partners who could help it emerge from bankruptcy as a stronger and more competitive company.
Yellow said it expects to pay back its private and government loans in full by selling its assets, including its real estate and equipment. The company said it has enough assets to cover the $1.2 billion it borrowed from the Treasury Department and private lenders led by Apollo. The company also said it will continue to pay interest on the government loan during the bankruptcy process.
Yellow said it hopes to complete its bankruptcy process within six months. The company said it will work with its employees, customers, suppliers, and other stakeholders to ensure a smooth transition and minimize any disruption.
The Implications of Yellow’s Bankruptcy
Yellow’s bankruptcy is the largest ever for a trucking firm, and will have significant implications for the industry and the economy. The bankruptcy will result in the loss of tens of thousands of jobs, as well as the disruption of supply chains and transportation networks across the country. The bankruptcy will also affect the U.S. government, which is likely to lose most of its equity stake in Yellow that it received as part of the loan deal.
Yellow’s bankruptcy also raises questions about the effectiveness and oversight of the government loan program that was meant to help businesses critical to national security during the pandemic. Some critics have argued that the program was poorly designed and executed, and that it failed to protect taxpayers’ interests or ensure accountability from borrowers.
Yellow’s bankruptcy also highlights the challenges and opportunities facing the trucking industry in the post-pandemic era. The industry is undergoing a transformation driven by technological innovation, environmental regulation, consumer demand, and competitive pressure. Some trucking firms are investing in electric vehicles, autonomous driving, digital platforms, and other solutions to improve their efficiency, sustainability, and profitability. Others are struggling to adapt and survive in a changing market.
