Yellow creditors’ battle over $550M-plus carcass heats up

Yellow Corp. and some of its creditors remain at odds over a final bankruptcy plan for the liquidation and distribution of the estate’s remaining assets, which now include $550 million in cash. The bankrupt less-than-truckload carrier’s unsecured creditors told a federal bankruptcy court in Delaware on Monday that it would submit its own plan in the coming days.

Counsel for Yellow (OTC: YELLQ) said it didn’t have the votes to proceed on its previously proposed plan but that it was still hopeful the parties could come to terms. Yellow’s largest shareholder, MFN Partners, which now owns two pension claims stemming from the company’s abrupt withdrawal from the plans in 2023, and the Milbank Group, which represents six other multiemployer pension claimants, are the known holdouts.

“Any plan that isn’t supported by MFN and the Milbank Group is going to be hotly contested. It’s going to be heavily litigated,” said Patrick Nash, partner at Kirkland & Ellis and lead counsel for Yellow. “I’m not Pollyannaish. Based on what we received from the committee on Friday, it’s possible that we could fold MFN and the Milbank Group into a global resolution.”

Nash said he’s neither optimistic nor pessimistic that the two firms will agree to a new plan.

The debtors received the new settlement plan, which is said to be supported by many of Yellow’s largest unsecured creditors, including Central States Pension Fund, on Friday. Yellow’s board is reviewing the plan, which hasn’t been shared with everyone.

Counsel for MFN and Milbank said they were excluded from the process and fear that any new proposal would be detrimental to their claims.

“It feels a little bit like … a sufficient majority are getting together, trying to come up with something that they’re then going to try to impose on the not-cool kids, if you will, the people who are not in those negotiations,” Andrew Leblanc, partner at restructuring firm Milbank, told the court.

The impasse further delays distributions to former Yellow employees and creditors.

Yellow’s original plan included full recoveries to former employees, who are due paid time off and commissions, and to secured creditors holding unimpaired claims. Other claims, including general unsecured claims, would see much lower recovery amounts under that plan.

Yellow had been operating under an extended exclusivity period, preventing other financial firms from proposing competing plans.

Any competing plan put forward, however, presumably includes full recoveries for employees’ PTO claims. Counsel for the committee said Monday that the new plan would cover partial recoveries to unsecured creditors, including a $917 million contract claim from Central States, to which Yellow was a contributor.

Prior pension claims from Central States to the court totaled more than $4.5 billion.

A monthly operating report for January showed $168 million in cumulative professional fees and expenses since the August 2023 bankruptcy filing. The company also had $343 million in cash at the time, but recent property and other asset sales appear to have pushed that number to $550 million.

The estate still has roughly 80 terminals left to sell. It has sold approximately $2.25 billion in real estate plus millions in rolling stock since the liquidation began. Those funds were used to pay all secured debt as well as fees to attorneys and advisers.

The distribution of funds could continue to take time. The Delaware court’s prior opinions on withdrawal liability and Worker Adjustment and Retraining Notification Act claims have been appealed.

Monday was slated as the confirmation hearing date for the bankruptcy plan but instead turned into a status conference as the current iteration failed to garner enough support.

The committee said it would file a competing bankruptcy plan to the court by the end of this week.

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