The downfall of the 99-year-old company will lead to the loss of about 30,000 jobs and could have ripple effects across the nation’s supply chains. It also underscores the risks associated with government bailouts that are awarded during moments of economic panic.
Yellow, which formerly went by the name YRC Worldwide, received the $700 million loan during the summer of 2020 as the pandemic was paralyzing the US economy. The loan was awarded as part of the $2.2 trillion pandemic-relief legislation that Congress passed that year, and Yellow received it on the grounds that its business was critical to national security because it shipped supplies to military bases.
Government watchdogs have scrutinized the loan because of the company’s financial turmoil and close ties to the Trump administration, which awarded the loan.
Since then, Yellow changed its name and embarked on a restructuring plan to help revive its flagging business by consolidating its regional networks of trucking services under one brand. As of the end of March, Yellow’s outstanding debt was $1.5 billion, including about $730 million that it owed to the federal government. Yellow has paid approximately $66 million in interest on the loan, but it has repaid just $230 of the principal owed on the loan, which comes due next year.
The fate of the loan is not yet clear. The federal government assumed a 30 percent equity stake in Yellow in exchange for the loan. It could end up assuming or trying to sell off much of the company’s fleet of trucks and terminals. Yellow aims to sell “all or substantially all” of its assets, according to court documents. Hawkins said the company intended to pay back the government loan “in full.”
The White House declined to comment.
Yellow estimated that it has more than 100,000 creditors and more than $1 billion in liabilities, per court documents. Some of its largest unsecured creditors include Amazon, with a claim of more than $2 million, and Home Depot, which is owed nearly $1.7 million.
After its bankruptcy filing, company officials placed much of the blame on the union, saying its members caused “irreparable harm” by halting its restructuring plan. Yellow employed about 23,000 union employees.
“We faced nine months of union intransigence, bullying, and deliberately destructive tactics,” Hawkins said. The Teamsters union “was able to halt our business plan, literally driving our company out of business, despite every effort to work with them,” he added.
In late June, the company filed a lawsuit against the union, asserting it had caused more than $137 million in damages by blocking the restructuring plan.
The Teamsters union said Yellow’s executives unjustly blamed the union for the demise of the company, which had been “plagued with financial trouble for nearly two decades,” officials said in a statement.
“Teamster families sacrificed billions of dollars in wages, benefits, and retirement security to rescue Yellow,” said Sean O’Brien, the union’s general president. “The company blew through a $700 million government bailout.” Calling Yellow’s top executives “dysfunctional” and “greedy,” he blamed them for failing to “take responsibility for squandering all that cash.”
Jack Atkins, a transportation analyst at the financial services firm Stephens, said that Yellow’s troubles had been mounting for years. In the wake of the financial crisis, Yellow engaged in a spree of acquisitions that it failed to successfully integrate, Atkins said. The demands of repaying that debt made it difficult for Yellow to reinvest in the company, allowing rivals to become more profitable.
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