Bankrupt Yellow Corp Reaches Settlement With Pension Plans After Long Legal Fight

Post by : Saif

Yellow Corp, once one of America’s major trucking companies, has finally reached a settlement with 14 pension plans that were demanding more than $7.4 billion. This settlement brings an end to a long and difficult legal battle that began after the company collapsed and filed for bankruptcy.

The pension plans agreed to accept a much smaller payment than the original amount they sought. According to court papers filed in Delaware, the settlement will also allow Yellow’s junior creditors to receive up to $7.4 million from the company’s bankruptcy sale money. These junior creditors were waiting behind larger lenders and government loans, and without this settlement, they would likely have received nothing.

Yellow Corp shut down in 2023 after a major dispute with its workers’ union. When the company went bankrupt, it sold all its assets, including shipping terminals, land, and trucks. The asset sales generated enough money to fully repay top lenders and the government-backed COVID-19 relief loan. However, they were not enough to cover the large claims from pension funds and other smaller creditors.

In September, Yellow lost an appeal that challenged the size of the pension plans’ claims. Even after selling everything it owned, the company expects to have only about $600 million to $700 million to pay all creditors. This was far below what was needed to satisfy the $7.4 billion pension demand.

Court filings show that the $7.4 million set aside for junior creditors might be reduced if Yellow ends up with less than $550 million in available cash at the end of its bankruptcy process. This means there is still some uncertainty for the smallest creditors.

During the legal dispute, Yellow also tried to challenge two regulations from the Pension Benefit Guaranty Corporation (PBGC). These rules control how pension plans and companies can use pandemic relief funds when calculating pension debts. Yellow argued that these rules unfairly increased its liabilities. However, the 3rd U.S. Circuit Court of Appeals in Philadelphia rejected Yellow’s challenge. The court said the PBGC rules were aligned with the goals of the 2021 American Rescue Plan Act, which provided billions of dollars to help struggling multi-employer pension plans. The court added that the law was designed to protect retirees and ensure that rescue funds were used only for pension payments and plan administration.

The settlement marks the closing chapter of Yellow Corp’s fall, once a major name in the trucking industry. While the agreement brings some relief to creditors, many of them will still recover only a small part of what they are owed.

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