The long story of the tribulations of Yellow continues, as bankruptcy once again threatens the large US trucker.The good news is that in June Yellow Corporation gained an agreement to restructure its loan obligations from both the US Federal Government as well as creditors such as Apollo Global Management.
The company was given a credit line of US $700m in 2020 as part of a package of assistance given in the context of COVID-19, although this was controversial at the time. The maturity of this and other financial instruments has been extended.
However, the threat of the collapse of the company remains and Yellow’s management is blaming the Teamsters Union. In a statement issued on June 27, 2023 Yellow Corporation lodged a court case against the International Brotherhood of Teamsters alleging that they “breached their binding union contract with Yellow causing more than $137 million in damages by unjustifiably blocking, for over eight months, Yellow’s restructuring plan to modernise its business, which is necessary to compete against non-union carriers that dominate the LTL business today.
These modernisation efforts, known as One Yellow, are essential to the Company’s survival”. The statement continues “without these crucial reforms, which are standard practice in the industry today, Yellow likely will not survive”.
The financial condition of Yellow Corporation is fragile, with creditors essentially only having extended a deadline for either repayment of loans or, presumably liquidation, by a few months. The present performance of the business does not inspire confidence that there will be a violent turn-around in its fortunes, with the first quarter of 2023 seeing an operating loss of $9.3m.
There is one possibility for the survival of Yellow. The US Government owns 30% of the equity of Yellow Corporation as a result of the loan given in 2020. It may lean on both the management, trade unions and creditors as well as inject more taxpayer’s money into yellow. This would be in-keeping with the present administrations ‘hands-on’ approach to union issues seen around rail and port labour negotiations.
If such a solution does not appear then an important market participant in the less-than-truck load and truck-load segment of road freight may disappear by the end of this year.
Source: Ti Insights
Author: Thomas Cullen
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