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Now no one may ever find out exactly how Yellow Corporation was essential to US national security. Amid the coronavirus pandemic in 2020, the troubled trucking company secured a $700mn loan from the Trump administration. It came from a programme intended for companies deemed important to national defence.
On Monday, Yellow filed for bankruptcy with the intention to wind down and sell its assets. Some 30,000 jobs may be lost. The company harshly criticised the Teamsters union.
Yellow, whose roots go back to 1906, had struggled for years with a heavy debt load and troubled acquisitions. Whatever its challenges, the company’s rapid implosion appears disproportionate.
Yellow specialises in “less than truckload” or LTL logistics. The company said its nascent “One Yellow” strategy to unify its various acquisitions was starting to bear fruit.
But conditions toughened this year and Yellow deferred a $22.5mn pension contribution to workers. The company claims that the threat of industrial action then sent volumes to about zero in just a few days. It added that Teamsters bosses “would rather see Yellow destroyed than be perceived as weak in negotiations”. The union denies this.
In 2022, Yellow achieved revenue of $5bn and ebitda of $343mn. It said that in a few years One Yellow would generate annual ebitda of $700mn. Such projections make a wind-down rather than restructuring a perplexing choice. Yellow has total debt of $1.2bn, including a $500mn term loan held by Apollo.
The bankruptcy will be expensive. Apollo is extending a $143mn bankruptcy loan with as much as a $32mn fee on top and a 17 per cent interest rate. The US Treasury has a third of the company’s equity. The stock, which recently achieved meme stock status, is now worthless
The collapse of a previously profitable company with apparently manageable debts is even more mystifying than Yellow’s national security designation.
Some company failures demonstrate capitalism is functioning well. This is not one of them.
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