Yellow Trucking Company May Be Heading For Bankruptcy

Yellow Trucking Company May Be Heading For Bankruptcy

a troubled trucking business that received $700 million in pandemic-era debt The federal government may be forced to file for bankruptcy protection this summer amid a dispute with its union, a development that could leave American taxpayers stuck with a failing company.

The business, Yellow, formerly known as YRC Worldwide, has been in financial trouble for years. The company lost more than $100 million in 2019 and has more than $1.5 billion in debt, including government debt. In 2022, YRC, which sends food kits, protective equipment and other supplies to military bases, agreed to pay $6.85 million to settle a federal lawsuit who accused him of defrauding the Department of Defense.

In 2020, the Trump administration, which had ties to the company and its executives, agreed to extend a pandemic relief loan to the firm in exchange for the federal government assuming a 30 percent equity stake in the company.

Three years later, Yellow is on the verge of bankruptcy.

Since receiving the loan, the company has changed its name, restructured its business and seen its stock price decline. As of the end of March, Yellow’s outstanding debt was $1.5 billion, including about $730 million owed to the federal government. Yellow owes almost $66 million in interest on the loan, but it just paid it off $230 of the outstanding principal on the loanWhich will come next year.

On Tuesday, Yellow sued the International Brotherhood of Teamsters for blocking the company’s restructuring plan and accused the union of causing more than $137 million in damages. The company said it was “taking immediate steps to try to save itself” and that the union was trying to “cause Yellow’s economic ruin”.

The company’s financial plight is the latest example of how some of the trillions of dollars rapidly spent during the pandemic have been misdirected, mismanaged or fraudulently obtained. Federal watchdogs and government agencies have expressed concern over signs of fraud and bad loans.

The Office of the Special Inspector General for Pandemic Recovery, an independent agency within the Treasury Department that scrutinizes some of the relief money, warned last month that it was seeing an “alarming rate of default by borrowers that defaults on nonpayment of interest payments.” are also failing to do so on loan.” The office warned that the number of defaults on pandemic loans could rise over the next two years when payments come due.

On Tuesday, the inspector general of the US Small Business Administration, which disbursed nearly $1.2 trillion in pandemic loans, a report said More than $200 billion, or 17 percent, was distributed to “potentially fraudulent actors”.

Yellow’s debt enabled the company to remain operational for some time and begin a restructuring plan. But economic adversities and a fight with the Teamsters union over the terms of the new contract have put the Yellows in a precarious financial position.

In May the company gave a report First quarter loss of $54.6 million And Moody’s has downgraded its credit rating Out of concern for his dispute with the union. Yellow’s share price has fallen more than 70 percent to $0.99 per share over the past year.

The company has warned union officials that the standoff is jeopardizing Yellow’s fortunes. Union officials claim that the company’s management is mismanaged and the concessions it is demanding are unfair.

“Yelo has long been unable to manage itself effectively — now the company says it won’t have the money until August,” Sean O’Brien, general president of the International Brotherhood of Teamsters, said in a video. message broadcast on facebook This month to the members of the Yellow Union. “These executives have no idea what they are doing, they have screwed this company.”

In a statement on Tuesday, Mr O’Brien said the allegations in Yellow’s lawsuit were “baseless and without merit” and said the company’s management had failed its workforce by being unable to meet the terms of its contract. Gave.

The union’s current contract expires next year. The main point of contention is whether hundreds of yellow truckers will have to start loading and unloading freight at the docks and a proposal that would give the company more authority over where truckers work. Yellow needs the union to agree to the next phase of its restructuring plan so that it can obtain additional financing and pay off its debts.

The company said it still intends to repay the loan it has received from the government and is negotiating in good faith and trying to save the jobs of its 30,000 employees.

Yello Chief Executive Darren Hawkins, referring to the union, said, “Yello is engaging with all stakeholders in Washington and is committed to negotiating a contract with IBT that works for employees, customers and shareholders. ” “Protecting the 30,000 jobs is Yellow’s top priority.

In the lawsuit, Yellow said it had sought the Biden administration’s assistance in brokering a deal to save the company, but the White House’s efforts were rejected by the union. The lawsuit says Yellow had approached Senator Bernie Sanders of Vermont for help and claims Mr Sanders’ office said it was not interested in helping because Yellow had been awarded a loan by the Trump administration. I went.

A White House spokeswoman did not immediately comment and Sanders’ office did not respond to a request for comment. A Treasury Department spokeswoman said the agency continued to monitor loans granted through pandemic recovery programs during the prior administration.

The Treasury Department also owns about 30 percent of Yellow’s common stock and the loan is secured by the company’s assets. If Yellow declares bankruptcy and has to liquidate, the US government will take over the majority of the company’s trucking fleet and real estate holdings.

Yellow’s loan, which was provided as part of a $2.2 trillion pandemic relief law passed by Congress in 2020, raised questions of fraternity from the start.

A report prepared last year by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis found that the money was distributed over the objections of career officials at the Defense Department and suggested that senior Trump administration officials had worked to ensure that had interceded for Yellow to receive the special prize. Treatment irrespective of concerns regarding eligibility to receive relief amount. The company, which has faced legal and financial troubles for years, also had a strong lobbying presence in Washington, in addition to deep ties to the Trump administration.

Although it is questionable whether Yellow is critical to national security, it is one of the largest freight trucking companies in the United States and its collapse would have an impact on the country’s supply chain.

UPS and ABF Freight have also been engaged in conversation Uncertainty has risen throughout the region, regarding their contracts with the Teamsters.

Chris SpearThe chief executive of the American Trucking Association urged the union and Yellow to work with a federal arbitrator on a new contract to ensure the company doesn’t go bankrupt.

“It is going to severely impact the economy and the supply chain,” Mr. Speer said. “Capacity is already tight.”

Bruce Chan, a transportation analyst at investment bank Stifel, said Yellow’s shuttering would significantly increase the cost of shipping to the United States and force companies to find other carriers to transport their “homeless” freight. He said vulnerable trucking companies are struggling under the pressure of changing consumer demand, which has shifted away from goods to services.

Although Yellow has found ways to avoid financial troubles in the past, Mr. Chan compared the current union dispute to “squeezing blood out of a stone.”

“It looks pretty tough for them,” he said.

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