- Company to wind down operations
- Thousands of workers at risk
- Yellow intends to pay back U.S. government loan
Aug 7 (Reuters) – U.S. trucking firm Yellow Corp (YELL.O) filed for Chapter 11 bankruptcy protection on Sunday, accusing the Teamsters Union of “driving it out of business,” and sparking an angry response from the labor group over the company’s financial management.
The nearly 100-year-old company’s bankruptcy filing puts about 30,000 workers at risk when the freight industry is already grappling with weakened volumes.
Yellow, formerly called YRC Worldwide, blamed the Teamsters for hastening its demise by opposing a restructuring plan. The union responded on Monday that the company mismanaged a $700 million federal loan and charged it with failing workers.
“Yellow’s dysfunctional, greedy C-suite failed to take responsibility for squandering all that cash. They still don’t,” said Teamsters President Sean O’Brien. “They shamelessly pin their corporate incompetence on working people.”
U.S. labor unions have enjoyed increased bargaining power due to worker shortages and steady public support for those who risked their lives early in the pandemic to keep the economy functioning.
Yellow recently averted a strike by 22,000 Teamsters-represented workers. The company is a dominant player in the “less-than-truckload” segment that hauls cargo for multiple customers on a single truck.
Teamsters leadership “was able to halt our business plan, literally driving our company out of business, despite every effort to work with them,” CEO Darren Hawkins said in a statement late Sunday.
Yellow’s clients include large retailers such as Walmart (WMT.N) and Home Depot (HD.N), manufacturers and Uber Freight. Some customers had paused shipments to Yellow on fears they could be lost or stranded if the trucking firm went bankrupt.
Walmart’s shipments will not be affected by the bankruptcy as it has a diversified transportation network, a source familiar with the matter said last week.
Prior to its demise, Yellow, one of the largest U.S. trucking companies, held roughly 8% to 10% of market share, per brokerage TD Cowen.
Yellow said on Sunday it intends to fully pay back the $700 million loan former President Donald Trump’s administration issued to bail out the long-troubled firm in 2020 under a pandemic relief program.
The company in a Delaware court estimated assets and liabilities of $1 billion to $10 billion, with more than 100,000 creditors.
Yellow has $1.3 billion in debt payments coming due in 2024, including a $567.4 million private-equity term loan in June and the U.S. loan in September.
The company also has a roughly $450 million secured revolving loan from a syndicate of banks arranged by Citizens Bank, Merrill Lynch and others that expires in January 2024.
“This leaves the taxpayer the last creditor to get repaid,” said the authors of a Congressional Oversight Commission report issued in June.
Yellow also gave the U.S. Treasury 15.9 million shares of its common stock as additional security for the loan, the authors said. The department held a 30.6% stake in Yellow, according to the trucking firm’s bankruptcy filing.
The bankruptcy filing comes after the Teamsters said late last month that it was notified that the company was ceasing operations.
Yellow, saddled with liabilities from its purchases of Roadway in 2003 and USF in 2005, reported total debt of $1.5 billion last year, according to Refinitiv data.
Shares fell 25% to $2.67 on Monday. They soared fivefold last week following a surge in retail investors’ interest.
Meanwhile, some workers filed two lawsuits against Yellow on Monday for failing to give the required 60 days notice before firing them.
Reporting by Priyamvada C, Juby Babu and Abhijith Ganapavaram in Bengaluru, Dietrich Knauth in New York, and Lisa Baertlein in Los Angeles, additional reporting by Siddharth Cavale and Jonathan Stempel in New York; Editing by Dhanya Ann Thoppil, Varun H K and Sriraj Kalluvila
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