Yellow Corp Faces $6.5 Billion Pension Liability Claims
A recent decision by a Delaware bankruptcy court has shed some light on the $6.5 billion withdrawal liability claims against Yellow Corp. The bankrupt less-than-truckload company will have to pay a portion of these claims, although the exact amount is still to be determined. This news sent Yellow’s stock plummeting by 90% as investors realized that the company’s assets may not be enough to cover its debts.
One of the key stakeholders in Yellow Corp is MFN Partners, a private equity firm that acquired over 40% equity stake in the company before its bankruptcy filing last summer. Despite holding a significant stake, MFN Partners provided bankruptcy financing to Yellow during its liquidation, which helped offset its exposure to equity losses.
The U.S. Treasury also holds a 30% stake in Yellow, which was issued as collateral for a $700 million Covid-relief loan provided to the company in 2020. Multiemployer pension plans (MEPPs) that Yellow once contributed to are now claiming that the company’s sudden shutdown has left them with unfunded vested benefits. However, Yellow argues that the plans are now fully funded following a pension fund bailout package in 2021.
The Pension Benefit Guaranty Corp. created regulations to ensure that the bailout funds would only be used for plan benefits and costs, not to reduce employer withdrawal liability. Judge Craig Goldblatt’s recent opinion supported both the MEPPs and Yellow to some extent, ruling that Yellow is responsible for withdrawal liability to 11 different MEPPs that received government funds.
Central States Pension Fund holds nearly $5 billion in withdrawal liability claims against Yellow, but the court ruled that Yellow’s total withdrawal exposure should be capped at 20 times its annual contribution amount as per the Employee Retirement Income Security Act. The court also directed Yellow to negotiate the actual amounts due with Teamsters funds in New York and Western Pennsylvania.
While Yellow still faces withdrawal liability claims from pensions that didn’t receive special financial assistance, the recent court decision has provided some clarity on the disputed legal questions. The company now has to navigate through the process of determining the exact amounts owed to various stakeholders.
In conclusion, Yellow Corp’s financial woes continue as the company grapples with significant withdrawal liability claims. The recent court decision has brought some clarity to the situation, but the road ahead remains challenging for the bankrupt trucking company.
