Bankrupt Yellow Corp. Settles COVID Loan with Full Repayment of Principal and Interest

  • Bankrupt Yellow Corp. Settles COVID Loan with Full Repayment of Principal and Interest

    Bankrupt Yellow Corp. Settles COVID Loan with Full Repayment of Principal and Interest

    Yellow Corp., formerly known as YRC Worldwide, has recently repaid the $700 million COVID-relief loan it received from the U.S. Treasury in 2020, along with over $151 million in interest, as per a statement released late Monday. This development is significant in the context of the controversies surrounding the loan, its terms, and Yellow Corp.’s financial struggles.

    The loan, part of the CARES Act designed to assist companies with liquidity needs due to COVID-related business disruptions, was criticized by some as an unwarranted bailout. Yellow Corp. qualified for the loan under a special provision for companies deemed “critical to maintaining national security.” However, the validity of this designation and the decision to grant the loan led to disagreements among lawmakers and between the Treasury and Defense departments.

    In 2023, a congressional oversight commission concluded that the loan to Yellow Corp. was a mistake, citing undue credit risk to taxpayers. The loan was split into two tranches: the first $300 million for pension and healthcare payments to Teamsters workers, and the second $400 million for capital investments, including updating the company’s fleet. This second tranche particularly attracted criticism for its use in capital expenditures rather than direct pandemic-related needs.

    As part of the loan agreement, the Treasury received a 29.6% equity stake in Yellow Corp., now valued at over $60 million. This stake was intended as collateral for the loan.

    Yellow Corp.’s repayment marks a crucial step in its ongoing Chapter 11 bankruptcy process. Matthew Doheny, the chief restructuring officer, emphasized the company’s commitment to repaying its obligations to American taxpayers. The company has been actively liquidating assets, including the recent $2 billion sale of roughly half of its real estate portfolio, comprising 153 owned and leased terminals, primarily to former competitors.

    The bankruptcy proceedings, overseen by a Delaware court, also involve the sale of Yellow Corp.’s substantial fleet, including 12,000 tractors and 35,000 trailers. However, the company still faces significant financial challenges, with around $900 million in secured debt and debtor-in-possession financing outstanding.

    Apart from these financial obligations, Yellow Corp. must address numerous unsecured claims. These include potential withdrawal liabilities from multiemployer pension funds, penalties for possible violations of the WARN Act, and over 200 personal injury claims. Furthermore, the company is pursuing a $137 million lawsuit against the Teamsters union for allegedly obstructing proposed operational modernizations.

    In summary, Yellow Corp.’s repayment of the COVID-relief loan marks a significant development in its bankruptcy proceedings and addresses some of the controversies that have surrounded the loan since its inception. However, the company still faces a complex path ahead, balancing the liquidation of assets, addressing various claims, and ongoing legal battles.

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