Yellow Bankruptcy Explodes into Bidding War

Date: Friday, August 25th, 2023
Source: Sourcing Journal

Old Dominion has stepped in with a $1.5 billion stalking horse bid for Yellow Corp.’s terminals, outpacing the $1.3 billion offer from less-than-truckload (LTL) trucking competitor Estes Express Lines.

Like Estes’ previous stalking horse bid, the Old Dominion proposal sets another floor for the 166 terminals to be sold out of a court supervised bankruptcy auction at a later date which could accept higher offers from other parties.

Sourcing Journal reached out to Old Dominion and Yellow.

The terms provide a maximum breakup fee of $26 million and up to $2 million in expense reimbursement. Old Dominion is required to make a 5 percent deposit as part of the agreement. The bid is good for 180 days.

The industry is watching to see who, if anyone, will top the Old Dominion offer during the stalking horse bidding process or in a potential bankruptcy sale.

“The only two players that I could see being able to compete with ODFL for Yellow’s facilities are FedEx (on behalf of the FedEx Freight division, which is the largest LTL carrier) or XPO (which is the third-largest LTL carrier with Yellow’s failure),” said Jason Miller, interim chairperson, department of supply chain management at Michigan State University’s Eli Broad College of Business.

“Given FedEx is reorganizing the Ground and Express divisions, I’m not sure how interested they would be in acquiring all these terminals as well,” Miller told Sourcing Journal.

The terminals, which range from 70-acre sites in Jacksonville, Fla., and Kernersville, N.C., to a 1.7-acre facility in Richfield, Ohio., have had no shortage of interest since the former Walmart and Home Depot freight mover shuttered operations late last month.

A lawyer for Yellow earlier this month told the bankruptcy court that the company had received formal expressions of interest in its assets from almost 100 parties.

Citing data from the 2017 Economic Census, the U.S. government’s official five-year measure of American businesses and the economy, Miller said the top eight LTL companies operated 2,204 establishments, most of which are end-of-line terminals.

End-of-line terminals are the most common type of hub in the LTL space. Miller said Yellow’s collapse puts as much as 10 percent of these terminals up for grabs. Built for picking up and delivering freight, they provide direct contact with both shippers and receivers and support trucking and logistics companies looking to store and deliver goods quickly to residential destinations.

Old Dominion, America’s second-largest LTL carrier with approximately 12 percent market share, according to company data, would add Yellow’s 166-terminal fleet on top of its own 256 service centers in 48 states if the bid is successful.

The Thomasville, N.C.-headquartered business generated $6.26 billion in revenue last year, on $1.38 billion in net income. At the end of the second quarter ending June 30, the company had approximately $55.1 million in cash or cash equivalents on hand.

As for Yellow, the bankrupt 99-year-old trucking firm already accepted an offer from hedge funds Citadel and MFN Partners, the trucker’s largest shareholder, to jointly provide a $142 million debtor-in-possession (DIP) bankruptcy loan. The loan will fund operations as Yellow winds down and sells assets, including the properties and tens of thousands of truck tractors and trailers.

The new financing will also be far less expensive than the $230 million previously floated by Estes, which pulled the loan offer when it placed the $1.3 billion bid.

Yellow shouldn’t have a problem paying off $1.22 billion in debt with $1.5 billion in new capital. Much of the debt would be paid back to one of its largest creditors, the U.S. Treasury, to which it owes $737 million stemming from a controversial Paycheck Protection Program (PPP) bailout in 2020.

With the financing, Yellow would also be able to pay more than $25 million dollars to shippers, suppliers, vendors and its own transportation partners. According to bankruptcy filings, the company’s top unsecured creditor is BNSF Railway, which Yellow still owes $6.31 million. Global analytics and digital solutions company EXL Service Holdings was the second-largest creditor at $3.33 million, while Amazon, a Yellow customer, is owed $2.09 million.

Additional creditors for Yellow include The Home Depot, Union Pacific, Penske Truck Leasing and Goodyear Tire & Rubber Co.


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