Yellow’s Bankruptcy Reaches Critical Settlement

Yellow US9855101062

The insolvent trucking giant Yellow Corp. has cleared a major obstacle in its Chapter 11 proceedings by reaching a pivotal settlement with 14 pension funds. These multi-billion dollar claims had stalled the company's liquidation process since its operational collapse in 2023.

Under the newly proposed agreement, pension funds have consented to dramatically reduce their original claims of approximately $7.4 billion. The settlement seeks court approval to recognize allowed claims of merely $1.5 billion. This development will release approximately $7.4 million from asset sale proceeds for distribution to subordinate creditors.

Following repayments of $1.2 billion to secured lenders and $213 million in bankruptcy financing, the estate retains between $600 million and $700 million to address remaining obligations. This settlement framework aligns with previous court rulings and enables recovery rates in the "high double-digit percentage range" for unsecured creditors.

Bankruptcy Proceedings Gain Momentum

This resolution represents a decisive turning point in Yellow's complex bankruptcy case. After ceasing operations last year, the company successfully liquidated its trucking terminals and fleet assets, yet the massive pension obligations continued to block final distributions to creditors.

The agreement comes in the wake of a significant legal setback in September, when Yellow lost its appeal to dismiss these pension liabilities. A federal appeals court simultaneously upheld regulations prohibiting the company from utilizing pandemic relief funds to reduce its pension obligations.

Creditor Payouts Accelerate

The clarification of pension claims eliminates the most substantial remaining uncertainty in Yellow's bankruptcy process. While equity shareholders typically face complete loss in such scenarios, this settlement accelerates the timeline for final payments to unsecured creditors.

Attention now shifts to obtaining judicial approval for the settlement. With the major pension funds accepting the proposed methodology, the bankruptcy trustee can address remaining smaller claims and distribute the estimated $600-$700 million surplus. Avoiding protracted litigation preserves capital that would otherwise be consumed by legal expenses.