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US trucking company Yellow has filed for bankruptcy and will wind down its business, collapsing under the weight of a $1.2bn debt pile that included a loan to the federal government and after a heated battle with the Teamsters union.
The almost century-old business, which filed for Chapter 11 bankruptcy protection late on Sunday in Delaware bankruptcy court, said it aimed to sell “all or substantially all” of its assets, which it listed as valued between $1bn and $10bn.
The company, then known as YRC Worldwide, received a $700mn Covid-19 relief loan from the Trump administration during the summer of 2020, resulting in the federal government holding a 30 per cent stake in the group. Chief executive Darren Hawkins said in a statement the loan would be paid back “in full”.
Hawkins said the company would also “maximise recoveries for creditors”. Yellow named Berkshire Hathaway-owned railroad BNSF, Amazon, DIY chain Home Depot and tyremaker Goodyear in a list of creditors with each having unsecured claims of at least $1mn. The company also owes about $500mn to private equity firm Apollo Global Management via a term loan.
The closure will result in the loss of about 30,000 jobs, further disrupting the broader trucking industry, which is contending with a slowdown in freight demand in a rising-cost environment.
Yellow sought to overhaul its operations, which had been stitched together through several big acquisitions over the past two decades. Its proposed efforts for a shake-up were blocked by the Teamsters this spring. Hawkins said in a statement the company “faced nine months of union intransigence, bullying and deliberately destructive tactics”, which caused Yellow “irreparable harm” and drove away customers.
The Teamsters said at the end of July they had been served legal notice that Yellow was ceasing operations and filing for bankruptcy. “Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government,” Teamsters general president Sean O’Brien said in a statement last week.
The union battle added pressure to a business that was saddled with debt, most of which would come due in 2024.
The boom in shipping during the pandemic has since normalised and put pressure on Yellow’s business, particularly as “big box” retailers trim inventory due to weak consumer demand for discretionary items.
The recent jump in fuel prices has not helped, and combined with stagnating demand for shipping resulted in the company’s net loss widening to $54.6mn in its most recent quarter.
Yellow’s bankruptcy could also have an impact on the domestic supply chain, driving up freight prices for customers as one of the industry’s lower-cost carriers exits the market.
Mario Harik, chief executive of rival trucking company XPO, acknowledged last week during an earnings call ahead of Yellow’s bankruptcy filing the “disruption” it might have on the industry. But he said the shake-up could enable XPO to “accelerate price and volume growth beyond our original targets”.
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