Struggling Freight Trucking Company Yellow Files For Bankruptcy After Government Bailout

(RTTNews) - Yellow Corporation (YELL), a freight trucking company with nearly 100 years of history, is filing for bankruptcy three years after receiving a $700 million pandemic-era lifeline from the federal government. The move comes after months of failed negotiations between Yellow's management and the Teamsters union, leading the company to shut down its operations last month. Seeking bankruptcy protection, Yellow aims to wind down its business in an "orderly" manner, according to a statement from its CEO, Darren Hawkins. The bankruptcy will result in the loss of about 30,000 jobs and may impact the nation's supply chains.

The financial troubles of the 99-year-old company were further exacerbated by a significant decline in Covid vaccine sales during the second quarter. In contrast to analysts' expectations of $692.4 million in sales, Yellow generated only about $185 million during the period, marking a staggering drop of over 94%. Consequently, the company reported its first per-share loss since September 2020, with an adjusted loss of $1.06 per share.

Yellow, formerly known as YRC Worldwide, received the $700 million loan during the summer of 2020 under the pandemic-relief legislation passed by Congress. The loan was granted due to the company's role in shipping supplies to military bases, which was deemed critical for national security. However, government watchdogs have scrutinized the loan's allocation, given Yellow's financial turmoil and close ties to the Trump administration, which awarded the bailout.

Despite efforts to revive the business, including a name change and a restructuring plan, Yellow's outstanding debt stood at $1.5 billion as of the end of March, with about $730 million owed to the federal government. The fate of the loan remains uncertain as the federal government holds a 30 percent equity stake in Yellow in exchange for the bailout. The company aims to sell "all or substantially all" of its assets during bankruptcy proceedings, and its CEO expressed an intention to repay the government loan in full.

Yellow's bankruptcy filing highlights the pressures faced by the small-freight trucking industry, known as "less than truckload" shipping, due to rising interest rates, higher fuel costs, and customer reluctance to accept price increases. Additionally, an acrimonious labor dispute between Yellow and the Teamsters union over wages and benefits further complicated the company's financial situation.

While Yellow has blamed the union for halting its restructuring plan, the Teamsters union asserts that the company's financial troubles date back nearly two decades. The bankruptcy could lead to temporary disruptions in freight services and may prompt further consolidation in the industry.

The bankruptcy proceedings are expected to create challenges for the company's creditors, including Amazon and Home Depot, which are among Yellow's largest unsecured creditors with claims of over $2 million and $1.7 million, respectively.

As the bankruptcy unfolds, Yellow's legacy as a long-standing transportation company faces an uncertain future, with significant implications for the trucking industry and those affected by its operations.