The threat of strike action was the last straw for a company that was slow to consolidate a series of acquisitions as the debts mounted.
| Yellow Corp sales executive Phil Sullivan recalls the moment he knew the haulier company was about to join the list of America’s biggest bankruptcies this year.
With 22,000 of Yellow’s 30,000-person workforce unionised, the company was disadvantaged compared with non-union carriers. Of the top five “less than truckload” freight carriers, which specialise in smaller loads, all but Yellow are non-unionised.
A last-minute debt-for-equity deal heavily diluted shareholders’ equity, while unions accepted wage concessions and freezes on pension payments in return for a stake in the company and board seats. That deal also gave confidence to private equity firm Apollo Global Management to lead a $US700 million loan facility to Yellow in 2019. Like most private equity deals, though, the loan included a high rate of interest: LIBOR plus 750 basis points.However, the reset was barely under way when the COVID-19 pandemic hit the following year.
In June, Yellow sued the union for blocking the restructuring plan, which, it said, was “essential to the company’s survival”.In a July 12 letter, CEO Darren Hawkins pleaded with the Teamsters, promising that the company would raise pay by $US11 an hour over five years if the union agreed to proceed with the final phase of the restructuring. But the union rejected it again.
“The corporation’s position was that the current labour contract, which didn’t expire until April 2024, allowed them to make the consolidation changes until that [the contract] was a point of contention. But the new leadership at the Teamsters union took exception to those changes,” he says.
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