Trucking company Yellow gained a reprieve from lenders, including requirements under a federal government loan of $700 million in pandemic aid, as the company tries to reset its finances and restructure its operations.
Yellow, one of the country’s largest trucking companies, has been seeking to refinance about $1.3 billion in debt that must be repaid in 2024 while it seeks cooperation from the Teamsters union for structural changes aimed at better competing in a tough freight market.
Nashville, Tenn.-based Yellow, which employs 30,000 workers, recently warned it was running out of cash and earlier this year hired investment bank Ducera Partners to help refinance its debt. A Yellow official said refinancing efforts stalled in the spring when the Teamsters blocked the company’s operations overhaul.
The agreements with lenders allows “the company to focus completely on getting to the table with the International Brotherhood of Teamsters and having alignment on modernization of the company and increasing wages for union employees,” said Darren Hawkins, Yellow’s chief executive.
Yellow got the $700 million federal loan as part of a 2020 Covid-19 package for private industries. The Biden administration expects the loan to be repaid by September 2024, but it waived requirements that the company maintain certain financial targets through this year’s financial quarter that ended June 30, according to a Yellow filing on Monday with the Securities and Exchange Commission.
Other lenders, led by Apollo Global Management, waived the financial requirements through Sept. 30 this year, according to the filing. That group is owed $567 million to be repaid in June 2024.
The agreements come with a slew of oversight requirements that include requiring Yellow to file weekly liquidity reports to the lenders along with weekly consolidated operating budgets. Yellow must also maintain liquidity above $35 million.
According to SJ Consulting, Yellow is the country’s third-largest operator in the less-than-truckload, or LTL, business, in which carriers haul shipments from multiple customers on the same truck between factories, warehouses and retail stores.
If Yellow goes out of business, SJ Consulting President Satish Jindel said the loss of trucking capacity is likely to raise shipping prices by mid-single to low-double digits for retailers and manufacturers.
Yellow has struggled financially for several years. Its cash holdings fell to $155 million at the end of March from $235 million at the end of December. Hawkins said that as of the end of June, the company had cash holdings of more than $100 million.
Stephens research analyst Jack Atkins said in a note Monday that without an intervention from the Biden administration to “both force the Teamsters to the bargaining table and facilitate an injection of liquidity, we believe that Yellow could go bankrupt and shut down in the next 30-90 days.”
Yellow’s streamlining efforts stalled this year when the Teamsters said the company needed to open up its multiyear contract with the union, which expires at the end of March 2024, to proceed with the changes. The Teamsters, which represents 22,000 Yellow workers, said it could begin talks in August.
Yellow filed suit in a federal court in Kansas on June 27, accusing the Teamsters of blocking the operations changes. The company said the impasse so far has cost Yellow more than $137 million in lost adjusted earnings, before interest, taxes, depreciation and amortization, and that the financial hit could push Yellow into liquidation as early as this summer.
This article originally appeared on Wall Street Journal
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