Yellow settles with pensions

Bankrupt Yellow Corp. has agreed to terms with 14 multiemployer pension plans regarding more than $7.4 billion in claims stemming from the former less-than-truckload carrier’s 2023 shutdown.

A motion filed this week with a federal bankruptcy court in Delaware is seeking approval for term sheets allowing roughly $1.5 billion in withdrawal liability and other claims from the pension plans. Central States Pension Fund, which covered thousands of the Yellow’s union employees, holds a little more than half of the total amount. The final payouts, however, are likely to be just a fraction of the face value.

The pension plans and Yellow have engaged in costly litigation over the past two years, trying to reach an agreement on the exit fees.

Yellow lost an appeal in September to have the withdrawal liabilities tossed. It argued that the pension plans were fully funded after receiving federal bailout money in 2021, leaving the company with no liability. However, the U.S. Court of Appeals for the Third Circuit upheld the Delaware court’s decision that The American Rescue Plan lawfully gave pension insurer Pension Benefit Guaranty Corp. the authority to craft guidelines to make sure bailout money would only cover plan benefits and costs.

The pensions ultimately agreed to the lower amounts as potential recoveries from the estate continue to dwindle.

“Absent settlement, it has been represented to the Debtors that parties intend to continue litigating these disputes, including exercising appellate rights, resulting in continued litigation for months, if not years, at significant cost to the estates,” the filing stated. “The Debtors estimate such costs would likely be in the tens of millions of dollars, if not more.”

The bulk of Yellow’s estate has been liquidated. Proceeds from roughly $2.4 billion in real estate sales and $176 million in net proceeds from fleet sales have been used to satisfy $1.2 billion in secured debt, $213 million in bankruptcy financing, and various other claims and expenses.

Recent estimates show the estate will have just $600 million to $700 million to satisfy outstanding claims, including those from the pensions and former employees.

The Delaware court recently approved a final waterfall distribution plan, showing high-teen percentage recoveries for unsecured creditors. However, Yellow’s largest equity holder MFN Partners has appealed the court’s ruling. (Employee claims for PTO and sick time have been classified as priority and will be paid.)

More FreightWaves articles by Todd Maiden:

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