Yellow Nears Long-Awaited Settlement With Pension Plans
Court Hearing on Retirees’ Funds Set for Dec. 18
Key Takeaways:
- Yellow’s current assets — even after selling nearly all of the carrier’s real estate and rolling stock — are estimated at $650 million to $700 million ahead of liquidation.
- The pension funds are headed by the Central States Pension Fund, which accounts for $5.7 billion of the liabilities, while the majority of the rest are Teamster locals in Northeastern and mid-Atlantic states.
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The estate of Yellow Corp. and 14 multiemployer pension plans (MEPPs) are closing in on settling more than $7.4 billion in claims against the bankrupt less-than-truckload carrier, court filings show.
A U.S. Bankruptcy Court for the District of Delaware hearing on a proposed settlement hashed out over many months between Yellow’s administrators and the pension funds is scheduled for Dec. 18.
However, the erstwhile No. 3-ranked LTL carrier’s unionized former employees will receive nowhere near the 10-figure payment in withdrawal liabilities sought by the pension plans.
Yellow’s current assets — even after selling nearly all of the carrier’s real estate and rolling stock — are estimated at $650 million to $700 million ahead of liquidation, and the estate’s legal bills continue to mount.
Less-than-truckload carrier Yellow filed for bankruptcy in August 2023. (George Walker IV/Associated Press)
One of the biggest reasons for settling the dispute, court records show, is that continuing to explore legal avenues would eat up yet more of the dwindling funds in Yellow’s coffers.
Maximizing the funds available was one reason bankruptcy Judge Craig Goldblatt backed Yellow’s Chapter 11 bankruptcy plan recently, a path that would see the remains of the carrier liquidated.
The pension funds are headed by the Central States Pension Fund, which accounts for $5.7 billion of the liabilities, while the majority of the rest are Teamster locals in Northeastern and mid-Atlantic states.
When Yellow sought bankruptcy protection in August 2023, the Nashville, Tenn.-based company withdrew from plans that secured retirement benefits for the carrier’s unionized employees.
The funds demurred, arguing Yellow should pay a “withdrawal liability” for halting payments into the retirement plans.
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Yellow’s administrators — and MFN Partners, the company’s largest shareholder — argued that because the funds received billions of dollars in Special Financial Assistance under the American Rescue Plan Act, the liability assessments should be much lower.
In September, an appeals court sided with the funds on the amount of money the estate potentially owed them.
The U.S. Court of Appeals for the Third Circuit on Sept. 16 affirmed a September 2024 decision by Goldblatt that left Yellow on the hook for the claims by the plans.
Judges , Patty Shwartz and Tamika Montgomery-Reeves heard arguments in the Third Circuit appeal June 25.
The appeal sought to challenge two regulations created by the Pension Benefit Guaranty Corp. to steward “reasonable conditions” on how the plans used the funds:
- The Phase-In Regulation, which prohibits MEPPs from fully counting Special Financial Assistance funds as plan assets all at once.
- The No-Receivables Regulation restricts MEPPs from recognizing as an asset any awarded Special Financial Assistance before the funds are paid to the plan.
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MFN and Yellow argued the regulations flouted how withdrawal liability calculations are typically drawn up, substantially boosting the funds owed to the plans.
Goldblatt ruled that the regulations were valid exercises of PBGC’s statutory authority and were not otherwise arbitrary and capricious.
The Yellow administrators, wrote Ambro, “lobs a slew of challenges at the regulations … each fails.”
“As part of its scattershot challenge to the regulations, Yellow faults them as arbitrary or capricious. We disagree. An agency action is arbitrary or capricious if it is not reasonable and reasonably explained,” he added.
Yellow is in the final phases of being wound down.
On Nov. 17, Goldblatt backed the Chapter 11 plan that would liquidate Yellow’s remaining assets and return any funds to creditors.
Goldblatt confirmed the plan and overruled MFN objections. In his oral ruling, Goldblatt decided more funds would be returned to creditors if the plan received the green light than through a conversion to a Chapter 7 liquidation, which MFN favors.
MFN holds a 42.5% stake in Yellow. The hedge fund and its Mobile Street Holdings affiliate object to confirmation of the plan because they believe the unsecured creditors will have too much influence on where the funds are dispersed.
