According to a recent news article, one of America’s largest trucking companies, Yellow, has signaled that it may be filing for bankruptcy. Several of its customers abandoned the company amid the Teamster’s strike, increasing the risk that the company would face mass liquidation if it went bankrupt. This could put employees at risk of layoffs and create a cascade effect throughout the logistics industry. No formal decision has been made on whether or not the company will file for bankruptcy, but those close to the matter believe it could happen as early as the beginning of August.
Yellow has been losing thousands of deliveries to other trucking companies because customers believe that their labor dispute with the Teamsters Union could disrupt their operations. The Teamsters represent the majority of the company’s workforce. The company managed to at least delay the strike for now, but that has not stopped customers from finding other companies to ship their freight. The company has lost 80% of its shipments, according to one estimate. The company continues to negotiate with the Teamsters concerning a new contract that would allow Yellow to restructure its operations and make them more efficient.
COVID-19 Rescue Loan at Center of Bankruptcy
Yellow received a $700 million COVID-19 rescue loan. However, federal authorities recently said the company should never have received the loan. A congressional probe asserted that the Treasury Department erred in disbursing the loan to the trucking company on national security grounds when Yellow did not meet the qualifications of that designation. They are now on the hook for that loan and an estimated $1.3 billion total.
At this point, you have a situation where the company is deep in debt and losing its customers to other carriers. Bankruptcy would allow the company some breathing room, but it may face mass liquidation, even in Chapter 11, if it chooses to file for bankruptcy.
In Chapter 11, the company’s assets are taken over by a bankruptcy trustee who determines the best way to make creditors whole. In cases where there just is not enough money for a new payment plan to work, the company is forced to liquidate its assets. That’s what Yellow faces now.
The company’s debt matures next year, but it has a total of $1.48 billion in liabilities against $806 million in assets. Creditors, including the federal government, may never recover the entirety of what they are owed, as is usual when a company files under Chapter 11. The risk that the company will be liquidated likely has workers concerned that their jobs will not be there once the bankruptcy begins. With customers fleeing the company for more stable shores, it could put workers in a difficult position.
Talk to an Indiana Bankruptcy Attorney Today
Chris Arrington represents the interests of Danville, Indiana, who are filing for bankruptcy. Call our office today to schedule a free consultation, and we can discuss your situation in more detail.