After years of financial struggles, Yellow is reportedly preparing for bankruptcy and seeing customers leave in large numbers — heightening risk for future liquidation. While no official decision has been announced by the company, the prospect of bankruptcy has renewed attention around Yellow's ongoing negotiations with unionized workers, a
Yellow, formerly known as
Here's what you need to know.
IS YELLOW FILING FOR BANKRUPTCY?
Not yet. But industry experts suspect that a bankruptcy filing could come any day now.
People familiar with the matter told The Wall Street Journal that the company could seek bankruptcy protection as soon as this week — with some noting that a significant amount of customers have already started to leave the carrier.
Meanwhile, according to FreightWaves, employees were told to expect the filing Monday. Yellow laid off an unknown number of employees Friday, the outlet later reported, citing a memo that stated the company was “shutting down its regular operations.”
According to
With customers leaving — as well reports of Yellow stopping freight pickups earlier this week — bankruptcy would “be the end of Yellow,” Jindel told The Associated Press, noting increased risk for liquidation.
“The likelihood of them surviving and remaining solvent diminishes really by the day,” added
Yellow media contacts did not immediately respond to the
Even if Yellow was able to sell its logistics firm, it would “not generate a sufficient amount of cash to keep them operational on any sort of permanent basis," Chan said. “Without a major equity injection, it would be very difficult for them to survive.”
HOW MUCH DEBT DOES YELLOW HAVE?
As of late March, Yellow had an outstanding debt of about
In 2020, under the Trump administration, the
The government loan is due in
Yellow's current finances and prospect of bankruptcy “is probably two decades in the making,” Chan said, pointing to poor management and strategic decisions dating back to the early 2000s. “At this point, after each party has bailed them out so many times, there is a limited appetite to do that anymore.”
In May, Yellow reported a loss of
A Wednesday investors note from financial service firm Stephens estimated that Yellow could be burning between
“It is reasonable to believe that the Company could breach its
DID THE COMPANY JUST AVERT A STRIKE?
The reports of bankruptcy preparations arrive just days after a strike from the
A series of heated exchanges have built up between the
On Sunday, a pension fund agreed to extend health benefits for workers at two
Talks between Yellow and the
“The financial struggles of Yellow are not related to the union and the contracts,” Jindel said, pointing to management's responsibility around its services and prices. He added the union wages from Yellow are “lower than any competitor.”
WHAT WOULD HAPPEN IF YELLOW WENT UNDER?
If Yellow files for bankruptcy and customers continue to take their shipments to other carriers, like FedEx or ABF Freight, prices will go up.
Yellow's prices have historically been the cheapest compared to other carriers, Jindel said. “That’s why they obviously were not making money," he added. "And while there is capacity with the other LTL carriers to handle the diversions from Yellow, it will come at a high price for (current shippers and customers) of Yellow.”
Chan adds that we're in an interesting time for the LTL marketplace — noting that, if Yellow declares bankruptcy and liquidates, “the freight would find a home” with other carriers, which may not have been true in recent years.
“It may take time, but there’s room for it to be absorbed,” he said.
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