Bankrupt Yellow Co. has settled with 14 multiemployer pension plans on more than $7.4 billion in claims from the former less-than-truckload carrier’s shutdown in 2023.
The filing, filed this week in federal bankruptcy court in Delaware, seeks approval of periodic notes authorizing approximately $1.5 billion in withdrawal liabilities and other claims related to the pension plans. The Central States Pension Fund, which covers thousands of yellow union employees, owns just over half of the total. However, final payments are likely to be only a fraction of face value.
The pension plans and Zard have been locked in a costly dispute for the past two years, trying to reach an agreement on exit costs.
Zard lost an appeal in September to remove the withdrawal debts. It argues that the pension plans will be fully funded after receiving the federal bailout 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 American Rescue was legally obligated to Pension Benefit Guaranty Corp. It gives the authority to make guidelines to ensure that the bailout only covers the benefits and costs of the plan.
Pensions ended up agreeing to lower sums as the potential recovery from the asset continued to decline.
“In the absence of settlement, the Debtors have been notified that the parties intend to continue to litigate these disputes, including exercising appellate rights, which would result in litigation continuing for months, if not years, at significant cost to the estates,” the filing states. The Debtors estimate that such costs will likely be in the tens of millions of dollars, if not more.
A major part of the yellow property has been liquidated. Proceeds of approximately $2.4 billion from property sales and $176 million in net proceeds from fleet sales were used to service $1.2 billion in secured debt, $213 million in bankruptcy financing and various other receivables and expenses.
Recent estimates indicate that the estate will have only $600 million to $700 million available to meet outstanding claims, including pension and ex-employee claims.
A Delaware court recently approved a final cascade distribution plan that provides a juvenile high recovery rate for unsecured creditors. However, MFN Partners, the largest shareholder of Yellow shares, has appealed the court ruling. (Employee requests for PTO and sick time are classified as a priority and will be paid.)
More FreightWaves articles by Todd Maiden:
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- Judge Oks Yellow Corp. Final Liquidation Plan
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