Yellow's Bankruptcy Plan: A New Dawn or a Dark Night?

Ladies and gentlemen, buckle up! We're diving headfirst into the chaotic world of Yellow Corp.'s new bankruptcy plan. This isn't just any old restructuring; it's a high-stakes game of poker where the chips are worth billions, and the stakes are the future of one of America's largest trucking companies. So, let's get down to business and see what this new plan means for Yellow Corp. and the broader LTL market.



First things first, let's talk about the elephant in the room: the pension liabilities. Yellow Corp. is staring down the barrel of a $6.5 billion pension liability, and that's a number that would make even the most seasoned investors sweat. The company's new bankruptcy plan involves liquidating assets to pay creditors, but the real question is, will it be enough? The company's administrators are hoping that by selling off remaining assets and appointing a trustee to distribute the funds, they can make a dent in that massive debt. But with pension funds asserting $6.5 billion in withdrawal liability, it's a tall order.

Now, let's break down the potential outcomes for Yellow Corp.'s creditors, particularly the unsecured creditors. If the pension liability isn't reduced or subordinated, Yellow expects to owe between $2.3 billion and $4.7 billion in general unsecured claims, leading to a recovery range of 0-16%. But if the liability claims are reduced or subordinated by as much as 50%, the company estimates that general unsecured claims will total between $1.3 billion and $2.7 billion, leading to a recovery range of 0-26%. That's a wide range, folks, and it's all dependent on how successfully Yellow can reduce or subordinate its pension liability claims.

But the implications don't stop at Yellow Corp. The broader LTL market is already feeling the ripple effects of Yellow's demise. The dissolution of Yellow's freight network has led to a significant redistribution of assets within the LTL market, with competitors such as Estes Express Lines and XPO Logistics acquiring former Yellow terminals to expand their operations. This redistribution could lead to increased competition and potentially higher shipping costs for consumers. And with the closure of Yellow, we're talking about 30,000 employees, taxpayers, and consumers who have seen prices rise due to supply chain disruptions. Resolving its assets and handling pending freight deliveries will be time-consuming, causing delays. Some supply chain clients foresaw this and had already switched to pricier alternatives, potentially leading to further increases in consumer prices.

So, what's next for Yellow Corp.? The company's new bankruptcy plan opens the possibility for a reorganization or restructuring, outlined by the administrators in a so-called term sheet. Under this restructuring, Yellow would have an enterprise value of $1.4 billion after issuing common stock under a $150 million rights offering. The restructuring would cap claims against Yellow at $750 million, to be paid back through $340 million cash on hand, $300 million in secured notes, and the $150 million rights offering. Major Yellow shareholders MFN Partners, Conversant Capital, and Carronade Capital Management would backstop the rights offering.

But here's the kicker: the exact amount of the pension liability still needs to be decided. And until that happens, the future of Yellow Corp. remains uncertain. The company's stock plummeted after the ruling, indicating a loss of confidence among investors. And with the market hating uncertainty, it's a tough road ahead for Yellow.

So, what do you do? Do you buy into the hype and invest in Yellow Corp., hoping that the new bankruptcy plan will pull them out of the fire? Or do you stay away, fearing that the pension liabilities will sink the company once and for all? The choice is yours, but one thing's for sure: this is a story you won't want to miss. Stay tuned, folks, because the next chapter in Yellow Corp.'s saga is just around the corner.