(Bloomberg) — As far as liquidations go, trucking company Yellow appears to be having a particularly good one.
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After meme traders piled into the stock just as the firm was cratering, investment funds and a rival trucker are sparring for the opportunity to finance its wind-down.
While the nearly 100-year-old firm’s core shipping business has collapsed, it still boasts lucrative assets worth an estimated $2.1 billion — helping Yellow get the kind of financing bids that it struggled to raise before a recent Chapter 11 filing.
Yellow is scheduled to update the bankruptcy court on its efforts to secure alternative financing at a Friday hearing.
Its loan from existing lenders led by Apollo Global Management carries a beefy 17% interest rate. Yellow could also be on the hook for $32 million in fees if the sale drags on for months. The loan has another provision to further protect about $501 million in outstanding debt owed to Apollo and other lenders.
The good news for the trucker: Hedge fund MFN Partners LP, its largest shareholder, has offered to loan the same amount of money at the same interest rate but lower fees, according to Yellow lawyer Patrick J. Nash. Rival trucking firm Estes Express Lines has floated a proposal on more favorable terms, offering up-to $230 million at 2% lower-interest and lower fees, Nash said.
Nash said he was “cautiously optimistic” that Yellow could be close to finalizing an alternative financing by Friday.
“The prospect of multiple bids is a good thing, in my view, despite the irony that they’re funding a business that’s completely shutting down,” said David Skeel, a professor at University of Pennsylvania Carey Law School.
Lucrative Assets
The trucker is in demand thanks to its substantial real estate portfolio with about 300 service centers, 42,000 trailers and 12,700 tractors — assets Yellow told a bankruptcy judge should fetch more than enough to fully repay its lenders. It famously has a $700 million loan from the US government during the pandemic rescue.
Nash said the company’s service centers are located throughout the country, many in fully-developed urban areas, where such terminals are no-longer being built. Industry experts have described the bankruptcy as a “once-in-a-lifetime opportunity” to secure such a large volume of these types of assets, Nash said.
Prospects are so promising that Yellow should also be able to repay additional debt to fund the Chapter 11 case, he said.
Still, existing lenders expressed doubt Wednesday over whether alternative financing will come to fruition. An Apollo lawyer said the firm hadn’t reviewed Estes’ proposal and expressed concern that Yellow might draw out the liquidation and negatively impact the value of its collateral.
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