Yellow Corporation and its creditors committee have filed a joint bankruptcy plan that would resolve billions in disputed pension claims and provide general unsecured creditors with an estimated 12-16% recovery, marking a significant step toward concluding what was once the largest unionized less-than-truckload carrier's lengthy bankruptcy proceedings.
The "Third Amended Joint Chapter 11 Plan," filed on March 28 in the U.S. Bankruptcy Court for the District of Delaware, details a settlement structure that would substantially reduce the aggregate claim amounts asserted against Yellow's estate while increasing recoveries for creditors who cannot assert claims against all debtor entities.
"The Plan Settlement resolves significant litigation that would otherwise further delay confirmation of a chapter 11 plan and distributions to unsecured creditors and diminish funds available to pay Allowed Claims," the disclosure statement reads.
Yellow's bankruptcy, filed in August 2023 after the company ceased operations following a threatened strike by the International Brotherhood of Teamsters, has involved complex disputes over multiemployer pension plan claims that would be resolved through the proposed plan.
The plan's cornerstone is a settlement with the company's largest creditors, including Central States Pension Fund, which had asserted claims of nearly $5.8 billion. Under the settlement, CSPF would receive an allowed joint and several general unsecured claim of $1.038 billion for withdrawal liability and $618 million for its contribution guarantee claim.
"Based on the Plan Settlement, if the Plan is confirmed and effectuated, the settled Joint and Several General Unsecured Claims of the settling J&S Holders and the Claims of the Non-J&S Holders will receive the same percentage recovery, which the Plan Proponents estimate to be between 12% and 16%," according to the disclosure statement.
The settlement addresses a major legal dispute over whether multiemployer pension plans that received federal Special Financial Assistance (SFA) bailout funding should reduce their claims against Yellow. The Bankruptcy Court had previously ruled that SFA recipients were not required to reduce their claims, a decision that is currently being appealed to the U.S. Court of Appeals for the Third Circuit.
Yellow has made substantial progress liquidating its assets since filing for bankruptcy. The company sold 128 owned properties and two leased properties for approximately $1.88 billion, enabling it to repay all of its approximately $1.2 billion in secured debt. The plan estimates a range of $750 million to $800 million in value ultimately distributable to creditors.
The plan would establish a Liquidating Trust to wind down Yellow's remaining assets. The Committee would designate the Liquidating Trustee, and the trust would be governed by a five-member board, with four members selected by the Committee and one by the Debtors.
"Given the uncertainty, delay and expense associated continuing various pending litigations, the Plan Proponents believe that the Plan Settlement, which materially reduces the aggregate Allowed amount of various Disputed Claims, is fair and reasonable and in the best interests of the Debtors, their Estates and their unsecured creditors taken as a whole," the document states.
The bankruptcy court has scheduled a confirmation hearing for May 19, 2025, with voting on the plan due by May 9.
Yellow, once a storied American trucking company with approximately 100 years of history, employed nearly 30,000 people and operated terminals in 300 communities across all fifty states before its collapse. The company transported approximately 10% of the nation's less-than-truckload freight before shutting down in 2023.
The bankruptcy filing cites the company's inability to implement Phase 2 of its "One Yellow" enterprise transformation initiative, liquidity issues, and a threatened strike by the Teamsters local unions as key factors leading to its collapse. COVID-19 impacts and industry-wide economic headwinds also contributed to Yellow's financial difficulties.
Kirkland & Ellis LLP and Pachulski Stang Ziehl & Jones LLP are representing the debtors in the bankruptcy case, while Akin Gump Strauss Hauer & Feld LLP and Benesch, Friedlander, Coplan & Aronoff LLP represent the Official Committee of Unsecured Creditors.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 99 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.
Link to full document: Third Amended Disclosure Statement for the Third Amended Joint Chapter 11 Plan of Yellow Corporation and its Debtor Affiliates