Yellow Truck has paid back its $700 million loan from the government granted through the pandemic-era CARES Act and also made payments on interest.
But that may not be enough to save the company and its employees; investors are making a last-ditch attempt at revival for this firm.
The $700M Covid Loan
Yellow has paid back its $700 million loan from the U.S. Treasury Department with interest, under the Coronavirus Aid, Relief and Economic Security Act. Yellow was awarded under a catch-all provision created by the Treasury Department during the pandemic, and its application was quickly processed even though Defense Department officials cautioned that Yellow’s less-than-truckload shipments could easily be taken over by other trucking firms. White House subcommittee report details allegations that union leaders and lobbyists for Yellow encouraged Treasury Secretary Steven Mnuchin and then-Defense Department Secretary Mark Esper to call in their certification of Yellow as essential to national security.
Money allocated through the CARES Act for businesses considered “critical to maintaining national security” was taken out to assist one company; however, according to a House subcommittee report senior Trump administration political appointees overruled DOD career officials who opposed its designation, and used this money for short-term contractual obligations, employee pension payments and purchasing trailers and tractors.
The Company’s Liquidity Crisis
Yellow Trucking Company, once one of North America’s premier for-hire carriers and an industry player in less-than-truckload (LTL) transportation, has paid back its $700 million Covid loan from the Treasury Department. But unsecured creditors and pension funds that have filed bankruptcy protection have still claimed billions from them.
That includes the US government, which is currently indebted $700 million and holds 29.6% of shares owed to it, which could be sold off during a bankruptcy filing to meme stock traders. It received this loan under a provision of the CARES Act designed for businesses essential to national security during pandemic outbreaks.
Yellow may be headed toward liquidation despite receiving an expensive loan and backing from Apollo Global, as evidenced by filings this week that showed how quickly their cash was being burned through and warned that bankruptcy proceedings may prevent them from paying their creditors in full.
The Company’s Restructuring
Yellow stated in its bankruptcy filing that they were unable to meet payments for wages and benefits, taxes and vendors essential to the business. Yellow owes approximately $1.5 billion, including $700 million due from pandemic-era Treasury loan due in 2024.
A congressional report concluded that Yellow was an inappropriate recipient for government loans made available under the CARES Act, designed for companies essential to national security. While Yellow made deliveries to military bases, other freight carriers could have done them more quickly.
Now, both the trucking industry and US taxpayers are left to sort through a large mess left by Yellow’s bankruptcy proceedings. A private investor is making a long shot bid to revive Yellow and bring jobs like Gomez back, but their success ultimately depends on navigating bankruptcy court processes – something FreightWaves Editor Rachel Premack joins us to explain.
The Company’s Future
Some in the trucking industry still hold out hope that Yellow’s resurrection lies within reach. A bankruptcy court recently approved the sale of its trucks and terminals; interested parties will need to buy this equipment and then reconstruct it themselves.
Yellow Technologies Inc is currently struggling under a $1.3 billion debt due in 2024 and owns 30 percent of shares owned by the US government, according to a government watchdog report. Both departments made mistakes when designating Yellow as being essential to national security as well as in handling its loan application and execution processes.
Last week, the Teamsters Union warned Yellow that it would strike them if it failed to make pension fund payroll payments in time. Yellow has been indebted to them for months as well as taxes and vendors essential to its operations; its bankruptcy filing states that its CARES Act loan may cover these expenses but that Yellow might have trouble paying all its obligations.
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