Yellow Corp. has sparked a bidding war between investment firms and a rival trucker interested in funding the now-shuttered company’s liquidation.
(Bloomberg) — Yellow Corp. has sparked a bidding war between investment firms and a rival trucker interested in funding the now-shuttered company’s liquidation.
The company is considering replacing an “expensive” bankruptcy loan from lenders led by investing giant Apollo Global Management, Patrick J. Nash, Yellow’s lead bankruptcy attorney, told the federal judge overseeing its wind-down on Wednesday. Yellow received multiple last-minute bankruptcy financing proposals prior to its first Chapter 11 hearing, he said.
Hedge fund MFN Partners — Yellow’s biggest shareholder — and competitor Estes Express Lines have both offered to fund the company’s bankruptcy on better terms, according to Nash. Neither offer is final and Yellow intends to seek court approval of one of the packages on Friday, he said.
Yellow shares were briefly halted after Bloomberg reported on the hearing. Shares fell 44.8% to close at $1.70.
Yellow filed for court protection on Sunday after dismissing almost all of its 33,000 workers. The company said it plans to liquidate after facing long-running financial troubles and a dispute with union leaders over a revitalization effort.
The company’s trucking terminals, trailers and trucks should be worth enough to pay off more than $1 billion in secured debt, Nash said. That debt includes more than $700 million owed to the US Treasury for a rescue loan Yellow got during the Covid-19 pandemic.
The two competing lenders “would be doing it a little bit cheaper,” Nash told US Bankruptcy Judge Craig Goldblatt Wednesday. Apollo and the other lenders in its group have offered a short-term loan that would refinance more than $500 million immediately and place restrictions on its liquidation process, Nash said.
“We resisted that mightily,” Nash said of the refinancing, known in bankruptcy parlance as a roll-up. The Apollo offer was locked in before the company filed its Chapter 11 case on Aug. 6. Yellow has the option of replacing that financing package if it can get a better offer.
Dennis Dunne, a lawyer representing investment funds managed by Apollo, described the alternative bankruptcy financings under consideration as “uncommitted” proposals that may not come together.
Apollo is concerned that MFN’s proposal could weaken existing lenders’ liens on Yellow’s assets, Dunne said. Apollo hasn’t had an opportunity to review Estes’ offer, which Dunn described as just an expression of interest, but could be an option if a Chapter 11 loan is junior to existing lenders’ liens, he said.
Read More: Yellow’s Apollo Loan Pays 17%, Pushes for Treasury Debt Payoff
MFN lawyer Eric Winston said the alternative financing his client is offering provides Yellow better economic terms and gives the firm more time to market its terminals and trucks to potential buyers. MFN was also prepared to challenge Apollo’s proposed bankruptcy loan, Winston said.
Nash said Estes has offered to extend Yellow $230 million, more money than the $142.5 million Apollo has offered, at a better rate. Estes’ proposed loan would carry a 2% lower interest rate than the 17% interest offered by Apollo and the other lenders and carries a lower fee, Nash said.
“We hope that this doesn’t lead to additional delay and degradation,” Dunne said during the hearing, which was conducted by video.
Yellow has faced years of financial stress. The company staved off a bankruptcy filing in 2009 after bondholders agreed to swap debt for equity, only to have to restructure again in 2011.
The case is Yellow Corp. 23-11069, US Bankruptcy Court District of Delaware (Wilmington).
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