After filing for bankruptcy protection, Yellow Corp, the American freight company, saw approximately 30,000 employees start to look for new jobs. Due to long-standing issues within the company, government intervention might be needed to ensure its debts are properly managed, while also safeguarding its key operations and workforce. Taxpayers could end up bearing some or all costs, leading to potential losses.
Yellow agreed to pay over $50 million in accrued employee benefits and pensions, thus avoiding a strike by roughly 22,000 Teamsters union-represented workers. However, court documents indicate the company's operations had significantly declined or even halted days before the agreement with the union was reached.
Yellow Corp, a company with nearly a century's history, ceased operations on July 30, 2022. It was a significant participant in the "less than truckload" (LTL) shipping sector, delivering goods for multiple customers using a single truck.
The company attributed its bankruptcy to the International Brotherhood of Teamsters, which represents approximately 22,000 of its employees. The management believed that the actions or policies adopted by the union led to the company's financial predicaments and ultimately forced it into bankruptcy protection.
Yellow's CEO, Darren Hawkins, stated in an announcement that union leadership blocked its business plans, directly leading to the company's collapse. However, union president Sean O'Brien held a differing opinion. He believed that Yellow Corp's failure was due to management failures and greed at the executive level, accusing company leaders of irresponsibility in financial management. O'Brien strongly criticized the executive team's attempt to shift the blame for the company's failure onto the working class, seeing it as an evasion of responsibility.
Financial analysts attributed Yellow's ongoing financial difficulties to factors such as acquisition-related debts, high operational costs, and low shipping rates leading to decreased revenue.
Data from the analysis firm TD Cowen showed that before filing for bankruptcy, Yellow Corp accounted for about 8% to 10% of the market share. Its clients included large retailers like Walmart and Home Depot, manufacturers, and Uber Freight among others. In its Chapter 11 bankruptcy filing, Yellow estimated its total assets at about $2.15 billion and total debts at approximately $2.59 billion.
Yellow executives stated that part of their plan for restructuring and resuming operations involved repaying the $700 million loan provided under the Trump administration's COVID-19 relief act in full. This was to be achieved by selling the company's properties and trucks to raise funds for repaying the government loan.
Earlier this year, the US government warned investors about potential losses in Yellow Corp's bankruptcy event, especially since the Treasury Department holds nearly 31% of the company's stocks as loan collateral.
Among shareholders, Apollo Global Management, Yellow's largest shareholder, will maintain its operations during the restructuring period through secured debt financing, thus obtaining priority in debt repayment. Additionally, Yellow had about $450 million in revolving secured loans from banks like Citizens Bank and Merrill Lynch.
