Trucking company Yellow Corp. filed for Chapter 11 bankruptcy, setting the stage for the potential sale of hundreds of truck terminals and leases across the United States and Canada in a move that could let rivals take new business from Yellow customers such as Walmart and Home Depot.
Yellow and 23 of its affiliates made the filings Sunday and Monday in the U.S. Bankruptcy Court for the District of Delaware as the company prepares to wind down operations after recent financial woes. Yellow announced plans to shut all its locations and permanently lay off 22,000 employees represented by the International Brotherhood of Teamsters union at the end of July.
A hearing is scheduled for Wednesday afternoon for the bankruptcy court to consider Yellow's agreement for a debtor-in-possession financing facility that is expected to give the nearly 100-year-old company enough liquidity to support the business throughout the marketing and sales process, according to court documents.
Yellow's lenders and advisers believe a sale process through a Chapter 11 case will “ultimately yield incremental value” than liquidating Yellow's assets through a "potentially disorderly" Chapter 7 case, according to court documents.
Yellow and its affiliates in the bankruptcy case listed $2.58 billion in total debt and $2.15 billion in assets as of March 31, according to court documents. Yellow’s liabilities include $700 million owed to the U.S. government stemming from a bailout loan it received during the pandemic. U.S. taxpayers own about 30% of Yellow's stock because of that loan.
Yellow was the third-largest U.S. trucking company in 2022 that carried shipments from multiple customers on the same truck, a category called less-than-truckload, according to trade publication Transport Topics. The largest, FedEx Freight, recorded $9 billion in revenue in 2022, followed by Old Dominion Freight Line at $5.3 billion. Yellow had $4.6 billion in 2022 revenue.
Desirable Network
Yellow’s network comprises 308 "strategically located" service facilities, including 169 owned facilities and 140 leased facilities, in addition to six warehouses managed by Yellow’s logistics solutions provider, Yellow Logistics, according to court documents.
Knight-Swift Transportation, the fifth-largest U.S. trucking company, plans to seriously consider bidding on Yellow's real estate placed on the sales block, CEO David Jackson said during a recent conference call.
“I would say that any opportunity to pick up properties along the way, we would have great interest in that and we would be opportunistic there,” Jackson said during the Phoenix-based company's July 20 earnings call.
Jackson noted that Knight-Swift acquired properties in 2022 previously owned by Waco, Texas-based Central Freight Lines, which ceased operations in late 2021.
Yellow’s situation could also allow Greenwich, Connecticut-based XPO to “accelerate price and volume growth beyond our original targets," said Mario Harik, CEO of the trucking and logistics provider, on Friday.
Fritz Holzgrefe, CEO of trucking company Saia, said on July 28 he expects to win new business from former Yellow customers.
“People understand that, if you displace a large player, it’s going to get redistributed in the industry,” Holzgrefe said.
While Yellow had already begun disposing of truck terminals before its bankruptcy filing, there remain valuable properties in its real estate portfolio, said Ted Morandin, managing member of brokerage Morprop Advisors.
“There is now a robust investor market for truck terminals,” Morandin said in an email to CoStar News.
But the bankruptcy court may have a tough time selling off some of Yellow’s truck terminals, Morandin said. Many of the properties “are older and on 10 acres of land or less, which is on the small side," said Morandin.
Representatives for Yellow did not return requests for comment from CoStar News.
Yellow's properties range in size from 70-acre terminals in Jacksonville, Florida, and Kernersville, North Carolina, to a 1.7-acre terminal in Richfield, Ohio.
Some of Yellow's rivals may steer clear of acquiring its real estate. Alain Bedard, CEO of TFI International in Montreal, said he wants to increase density by adding former Yellow customers, not buying its truck terminals.
"We’ve got 4,000 too many doors today,” Bedard said on Aug. 1, referring to dock doors at its truck terminals. “One of the weakest players now is gone. With the demise of one of our peers, this is a really lucky event for us. It helps us build density.”
Yellow’s corporate headquarters is located in Nashville, Tennessee, and it maintains offices throughout North America, including offices for its Yellow Freight subsidiary in Overland Park, Kansas. Its subsidiaries include New Penn Motor Express, Roadway Express, USF Holland and YRC Freight Canada.
For the Record
Kirkland & Ellis is serving as Yellow's lead restructuring law firm; Pachulski Stang Ziehl & Jones is the company’s local counsel in Delaware; Kasowitz, Benson and Torres is serving as special litigation counsel; and Goodmans is the company’s special Canadian counsel. Ducera Partners is Yellow's investment banker, while Alvarez & Marsal is the company’s financial adviser.