A federal bankruptcy court in Delaware has given the green light for the final liquidation of Yellow Corp.’s estate, paving the way for the distribution of up to $700 million to remaining creditors, including former employees. This decision comes after Yellow Corp., a former less-than-truckload carrier, ceased operations on July 30, 2023.
One of Yellow’s largest equity holders, MFN Partners, who had a 42.5% equity stake in the company, has expressed opposition to the proposed bankruptcy plan. They argued that the governing committee, composed of creditors with potential conflicts of interest, would prioritize their own financial outcomes. MFN suggested that recoveries for unsecured creditors would be higher in a Chapter 7 liquidation.
Despite MFN’s objections, a single voting class of creditors approved the plan. The plan’s liquidating trust board of managers includes Central States Pension Funds and New York State Teamsters Pension and Health Funds.
Judge Craig Goldblatt overruled MFN’s objections and confirmed the final Chapter 11 plan. He stated that the plan was not proposed in bad faith and that creditors would not see greater recoveries in a Chapter 7. Goldblatt emphasized that the plan includes appropriate protections regarding interested party transactions and conflicts of interest.
While there were some concerns about the assumptions in the analysis provided by the debtors’ liquidation expert, Goldblatt believed that converting the bankruptcy to a Chapter 7 would not benefit creditors. The value of the estate’s distributable value has decreased from $900 million to $700 million, with Goldblatt cautioning that prolonging the process could diminish value.
The timeline for creditor recoveries remains uncertain, with potential factors including MFN’s potential challenge to the ruling, ongoing litigation with Central States and the Teamsters, and Yellow’s breach-of-contract lawsuit against the Teamsters. Employee claims for PTO and sick time are classified as a priority in the plan and will be paid.
The estate has sold nearly $2.4 billion in real estate and realized $176 million in net proceeds from fleet sales. These proceeds have been used to satisfy secured debt, bankruptcy financing, and other claims and expenses.
Overall, the final liquidation plan for Yellow Corp.’s estate faces challenges but aims to provide creditors, including former employees, with a fair distribution of assets. The decision by the federal bankruptcy court in Delaware sets the stage for the closure of Yellow Corp.’s financial affairs.
