Estes Offers $1.3 Billion for Yellow Terminals

‘Stalking Horse’ Bid Comes as Yellow Outlines Bankruptcy Loan from MFN, Citadel
Yellow trucks at a California terminal
Yellow trucks at a California terminal. (David Paul Morris/Bloomberg News)

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Estes Express Lines is set to be at the front of any queue to buy the 169 terminals of bankrupt less-than-truckload rival Yellow Corp. after agreeing to submit a $1.3 billion stalking horse bid, a court heard Aug. 17.

AUG. 19 UPDATE: Old Dominion tops Estes' bid

Richmond-Va.-based Estes will not, however, provide a $230 million loan to Yellow, as was under discussion the last time the U.S. Bankruptcy Court-District of Delaware heard from lawyers representing Yellow, its shareholders and creditors on Aug. 11.

Instead, the largest of those shareholders, MFN Partners, will team up with fellow hedge fund Citadel Credit Master Fund to provide a combined $142.5 million while the Nashville, Tenn.-based carrier is wound down, Yellow attorney Allyson Smith told the court.

Citadel will provide a $100 million loan while MFN will provide $42.5 million as the assets of the fallen 99-year-old company are sold off.

Miami-based Citadel bought out Apollo Global Management’s $485 million loan on Aug. 11. Smith told U.S. Bankruptcy Judge Craig Goldblatt that Citadel, which became Yellow’s largest debt holder with the purchase, immediately expressed an interest in providing a loan, known as debtor-in-possession (DIP) financing.

The terms of the loans were much more favorable to Yellow than what Apollo was offering, Smith told the court, noting that the DIP fee would be 4% rather than 22%-34%, equating to savings of between $27 million and $42 million for Yellow, which filed for Chapter 11 bankruptcy protection Aug. 6.

YRC Freight terminal

A YRC Freight terminal in July. Yellow had about 11,700 company-owned tractors and about 42,000 trailers at the end of 2022. (Charlie Riedel/Associated Press) 

The proposed loans from Citadel and MFN will have a 15% interest rate rather than the 17% Apollo was proposing. Each has a 180-day maturity. An agreement is also in place in principle for MFN to provide a further $70 million.

Apollo’s offer was on the table before Yellow filed for bankruptcy protection, but the company could replace the offer if it found an offer that was more favorable.

A stalking horse bid is an initial offer for the assets of a firm in distress, meaning there is a bar other bidders cannot undercut, although other bids are welcome, which means Estes could be replaced as Apollo was if a better deal is available to Yellow.

If Estes’ bid is not successful, the company will receive a break-up fee of 2%, equivalent to $26 million, Smith said.

Estes told Transport Topics that “as a proud member of the transportation industry, Estes felt it was important to try to bring a proposal to the Yellow bankruptcy estate and its creditors that would add some value for the benefit of all case constituents and reduce some of the uncertainty surrounding this bankruptcy process.

“We were pleased to see our earlier involvement in the case resulted in the debtor securing more reasonable debtor-in-possession financing and look forward to working with Yellow and its creditor body to advance a mutually beneficial sale process. We know the people in this space and truly want to help if we can, but much needs to play out in this case,” it added.    

The hearing was delayed from Aug. 15, but Smith said the “additional time did prove beneficial” as the loans and stalking horse bid for all 169 Yellow terminals.

Most of the parties in the bankruptcy proceedings back the loans and stalking horse bid, although a committee for unsecured creditors was only formed Aug. 16, according to Jane Leamy from the Office of the U.S. Trustee, which oversees bankruptcy cases. The unsecured creditors will be the last to be repaid.

MFN, Yellow’s biggest shareholder, is pleased with the way things have turned out so far, said its representative, Quinn Emanuel Urquhart & Sullivan’s Eric Winston, although there had been “very hard fought and continuous negotiations.”

Yellow Corp. ranks No. 13 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. Richmond, Va.-based Estes Express Lines ranks No. 14. They rank No. 3 and No. 5, respectively, among the largest less-than-truckload carriers.

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