Yellow Bankruptcy and Section 363

Welcome to the thirty-sixth Pari Passu newsletter.

Today, we are going to learn more about the restructuring process of another company some of you might be familiar with: Yellow Corporation.

Overview

On August 6, 2023, Yellow Corporation (formerly YRC Worldwide), a near-century-old trucking company that specialized in shipping, filed for Chapter 11 bankruptcy protection, only three years after receiving a $700mm, pandemic-inspired bailout from the federal government during the Trump administration (which was initially scrutinized due to the company’s financial affiliation with the Trump administration due to its financial backing with Apollo Global Management). Prior to filing for Chapter 11, the company shut down all operations and laid off all employees, resulting in the loss of about 30,000 jobs and the end of a long-standing company. In terms of Yellow’s current financials, their outstanding debt was $1.2Bn, including the $730mm they borrowed from the federal government. For their loan, they have paid $66mm in interest, but only a fraction of the principal owed. To guarantee returns, the federal government may use its 30% stake in the company to liquidate tangible assets, such as its fleets of trucks and shipping terminals. The cause of the company’s demise is rooted in its longstanding financial troubles and issues exacerbated by the Teamster union.

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