Trucking company Old Dominion Freight Line’s $1.5 billion bid to buy real estate from bankrupt trucker Yellow Corp. sets the stage for the auction of one of the largest portfolios of truck terminals in key North American markets to ever go on sale.
Old Dominion’s offer has been endorsed by Yellow as the preferred stalking-horse bid that sets the minimum price for the properties, according to bankruptcy court and regulatory filings, and tops an earlier $1.3 billion bid from rival Estes Express Lines.
Yellow, based in Nashville, Tennessee, filed for Chapter 11 bankruptcy protection on Aug. 6 after 94 years in business because of elevated debt levels from multiple acquisitions. The company owns nearly 170 truck terminals and warehouses in the United States and Canada.
The Yellow properties would be a good fit with Old Dominion’s existing footprint of truck terminals, said Jeff Diener, an attorney at BakerHostetler who is representing Old Dominion in the bidding process.
“They present strategic value for Old Dominion,” Diener told CoStar News in an interview.
Old Dominion owns 231 truck terminals in the U.S., according to its annual report. Some of its largest terminals are in the Atlanta, Dallas, Indianapolis and Memphis, Tennessee, markets. If Old Dominion ends up buying all of Yellow’s owned terminals, it would potentially expand Old Dominion’s portfolio by more than 70% and establish its dominance in the less-than-truckload category of companies that carry shipments from multiple customers on the same truck.
Old Dominion, the second-largest less-than-truckload company, is publicly traded and has been in business for 89 years. It has been one of the top-performing trucking company stocks in 2023 with shares having climbed 44% this year to $412.65. That compares to a 31% rise in the Dow Jones U.S. Trucking Index.
Attorneys for Old Dominion think its offer for Yellow’s properties is likely to prevail because of the company’s financial strength and since its finances are publicly accessible, said Diener.
“Old Dominion has a very sophisticated team that’s very experienced in real estate transactions,” Diener said.
Stalking-horse bids set a minimum price for the assets that a bankrupt company is trying to sell. Other companies can still submit bids for Yellow’s real estate. Potential buyers must submit bids to the bankruptcy court by Oct. 15. An auction has been scheduled for Oct. 18.
Terms of Old Dominion’s stalking-horse agreement to purchase some or all of Yellow’s real property include a breakup fee to be paid to Old Dominion of no more than $26 million if it’s not selected as the winning bidder.
Old Dominion must also prove that it’s a “credit worthy entity with cash and/or financing commitments for the entire” bid amount, and it must pay any and all transfer taxes and real estate closing costs, according to a court document.
Yellow has agreed to debtor-in-possession financing of at least $142.5 million from Citadel Advisors and MFN Partners to help fund operations and bankruptcy proceedings.
The U.S. Treasury Department is one of Yellow’s largest creditors due to a $700 million federal loan the company received during the pandemic.
Yellow’s assets may also be broken up and sold as parts rather than as a single portfolio, according to court filings. But Old Dominion believes that Yellow’s real estate is more valuable as a single portfolio than if the truck terminals and warehouses were sold individually, said Elizabeth Green, an attorney at BakerHostetler who is also representing Old Dominion.
“The question is whether they’re more valuable together or not,” she told CoStar News. “If you pick out the plum properties from Yellow’s portfolio, what do you do with the rest of it?”
Yellow’s truck terminals are located near interstate highways and are zoned for industrial uses, making the real estate more valuable than other available properties. Some of its owned terminals are located in key markets such as Chicago; Nashville; Portland, Oregon; and Columbus, Ohio. Yellow also leases more than 100 terminals.
Old Dominion’s bid came after accessing financial details and property data about Yellow’s real estate portfolio through a confidential database established by Ducera Partners, one of Yellow’s bankruptcy advisers. Companies interested in bidding on Yellow’s portfolio that want to access the data are required to sign nondisclosure agreements, Green said.
Old Dominion’s offer does not include Yellow’s trucks and trailers, Green said. Those assets will be sold separately in bankruptcy court.
Old Dominion, based in Thomasville, North Carolina, and Estes, headquartered in Richmond, Virginia, have not released details of their offers. Details of Old Dominion’s offer will probably be filed with the court by Sept. 1 since Yellow has endorsed Old Dominion’s offer as the stalking-horse bid, Green said.
Michael Roeschenthaler, an attorney for Estes, said the company has no current plans to release additional financial terms of its offer. Estes is a privately owned company that also competes in the less-than-truckload market. Estes recorded about $5.1 billion in 2022 revenue compared to Old Dominion’s $6.3 billion, according to company reports.
“We are currently in negotiations with the debtor and the creditors’ committee and cannot provide further information at this time,” Roeschenthaler told CoStar News. His firm, Whiteford, Taylor & Preston, is legal counsel to Estes.
A spokesperson for Estes declined to comment to CoStar News. Yellow did not respond to a request for comment from CoStar News.
Kirkland & Ellis is serving as Yellow’s lead restructuring law firm and Pachulski Stang Ziehl & Jones is the company’s local counsel in Delaware. Alvarez & Marsal is the company’s financial adviser. Creditors appointed to the official committee of unsecured creditors include BNSF Railway, International Brotherhood of Teamsters, Michelin North America Inc., Daimler Trucks and RFT Logistics, among others. The proposed counsel for the official committee of unsecured creditors includes Akin Gump Strauss Hauer & Feld and Benesch, Friedlander, Coplan & Aronoff.
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