Judge Backs Yellow Chapter 11 Bankruptcy Plan
Top Shareholder MFN’s Objections Overruled
Key Takeaways:
- Hedge fund MFN and affiliate Mobile Street Holdings objected to confirmation of the plan because they believe the unsecured creditors will have too much influence on where the funds are dispersed.
- Defunct less-than-truckload carrier Yellow filed for bankruptcy in August 2023.
- About 11 of the 325 terminals Yellow owned or leased when filing for bankruptcy remained unsold in September, a court filing showed.
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A federal bankruptcy judge on Nov. 17 backed a plan that would liquidate Yellow Corp.’s remaining assets and return remaining funds to creditors.
confirmed the Chapter 11 bankruptcy plan and overruled objections by the bankrupt less-than-truckload carrier’s largest shareholder, saying the plan was proposed in good faith.
In his oral ruling, Goldblatt decided that more funds would be returned to creditors if the plan — the fourth formulated — was approved than through a conversion to a Chapter 7 liquidation, which MFN Partners favors.
Goldblatt estimated Yellow’s current assets at $650 million to $700 million.
MFN holds a 42.5% stake in Yellow. The hedge fund and its Mobile Street Holdings affiliate object to confirmation of the plan because they believe the unsecured creditors will have too much influence on where the funds are dispersed.
Atypical Objection
Goldblatt said during the U.S. Bankruptcy Court for the District of Delaware hearing that the MFN objection was atypical in arguing that the process had been “too solicitous” toward the large creditors, hurting the interests of equity holders and other creditors.
“Having presided over this bankruptcy case now for 2½ years, I do understand MFN’s concerns,” Goldblatt said. “There is no question, but that [creditors] committee members have over the course of this bankruptcy case made rather aggressive use of the tools and protections provided to them by the bankruptcy code.”
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Goldblatt also noted concerns about how certain creditor committee members would not support the bankruptcy plan unless they were in control of the post-confirmation trust.
However, Goldblatt decided Chapter 7 conversion would extend the litigation in the case for 18 to 24 months, minimizing the funds that could be returned to creditors to the tune of about $50 million.
Average costs for lawyers and professional services were running at $3.5 million a month, he noted.
Goldblatt said he would issue a written order at a later date. The written order had yet to be made public Nov. 18.
MFN still could appeal the Nov. 17 ruling.
Terminal Sales Swell Coffers
Ten days earlier, Goldblatt approved the sale of six former Yellow terminals, swelling the funds available to creditors.
The disposal of the terminals raised more than $10.2 million, including the $375,000 sale of a Montgomery, Ala., facility to a unit of ArcBest on Oct. 17.
Fort Smith, Ark.-based ArcBest ranks No. 13 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 8 in the LTL segment.
The majority of the other facilities were sold to real estate firms, including sites in Florence, S.C.; Jacksonville, Fla.; Birch Run, Mich.; and Mountain Top, Pa.
One exception was the sale of a facility in Cumberland, R.I., for $2.75 million to Smithfield, R.I.-based civil contractor John Rocchio Corp.
About 11 of the 325 terminals Yellow owned or leased when filing for bankruptcy remained unsold in September, a court filing showed. The real estate sales generated more than $2 billion in revenue.
The estate also received net proceeds of $175.74 million from rolling stock sales that generated gross proceeds of $236.42 million, according to an Aug. 29 filing.
Yellow’s administrators continue to pursue further funds from other avenues too, personifying the comprehensive approach Goldblatt referred to.
Legal Action Against Teamsters
An appeals court reversed a ruling that blocked Yellow’s efforts to sue the Teamsters union for breach of contract.
U.S. Court of Appeals for the 10th Circuit decision will send the case back to the U.S. District Court for the District of Kansas — Wichita.
The Teamsters said it was ready to win its fight with the Yellow estate in Kansas.
The case began when Yellow sued the union in the weeks leading up to the then-No. 3-ranked less-than-truckload carrier’s bankruptcy filing in August 2023. The Teamsters had balked at the second phase of a proposed terminal network restructuring.
However, the U.S. Court of Appeals for the Third Circuit ruled in September that Yellow remains on the hook for $6.5 billion in claims by pension funds.
When Yellow sought court protection, the carrier withdrew from plans that secured retirement benefits for unionized employees. The pension funds objected, arguing Yellow must pay a “withdrawal liability” for halting payments into the retirement plans.
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