Yellow Proposes New Bankruptcy Plan After Court Loss on Pensions

Yellow Corp. is proposing a revamped bankruptcy plan that would liquidate assets to pay creditors after an earlier proposal favored by its hedge fund owners was effectively taken off the table by an unfavorable ruling.

The fallen trucking company aimed to provide a recovery to its equity holders, including MFN Partners, had Judge Craig T. Goldblatt of the US Bankruptcy Court for the District of Delaware ruled in its favor in September on a dispute over how to calculate its liability for withdrawing from pension plans. A favorable ruling for Yellow would have allowed the company to pay general unsecured creditors in full and provide a distribution to equity holders, it said in a filing Thursday.

But now, “the Debtors believe that such proposal is not actionable, and this Plan represents the value maximizing path for the Chapter 11 Cases,” Yellow said in documents accompanying its new proposed restructuring plan.

Under the amended plan, Yellow would liquidate assets and appoint a trustee to distribute those funds to creditors. Through asset sales last year, it generated enough money to cover its secured debt claims and its bankruptcy funding, it said. It has “dozens” of assets it can further monetize, it said in the Thursday filing.

Goldblatt’s ruling left uncertain how much pension debt Yellow faces, but the company said its liability could still be reduced or subordinated to other claims.

“This argument remains unresolved, and it is unclear if such argument will be successful or the amount by which the Withdrawal Liability Claims would be reduced if so,” Yellow said in a footnote.

Pension funds asserted $6.5 billion in withdrawal liability against Yellow.

How much the liability is reduced will dictate recovery for unsecured creditors, Yellow said in the filing.

If the pension liability isn’t reduced or subordinated, the company expects it would owe between $2.3 billion and $4.7 billion in general unsecured claims and would pay them between 0-16%.

If the liability claims are reduced or subordinated by as much as 50%, the company estimates that general unsecured claims will total between $1.3 billion and $2.7 billion, leading to a recovery range of 0-26%.

Yellow is represented by Kirkland & Ellis LLP and Pachulski Stang Ziehl & Jones LLP.

The case is Yellow Corp., Bankr. D. Del., No. 23-11069, disclosure statement 10/17/24.