Yellow Corp., a bankrupt trucking company, saw its stock fall 90% on Friday after a court decision about its pension debts. The Delaware bankruptcy court discussed claims against Yellow for $6.5 billion in pension liabilities. However, the exact amount Yellow will have to pay is still unclear.
This news caused Yellow’s stock price to drop to just 50 cents per share. Investors are worried that the company’s assets might not be enough to cover all its debts and pension payments. MFN Partners, the company’s biggest shareholder with a 40% stake, was affected by the drop. The U.S. Treasury also holds a 30% stake in Yellow due to a $700 million loan it gave the company during the COVID-19 pandemic.
Pension Debts
Yellow stopped operating in August 2023 and now faces large claims from pension funds. These claims come from multiemployer pension plans (MEPPs) that say Yellow owes them money for pension benefits. Yellow argues that these pension plans are fully funded, thanks to a bailout in 2021 under the American Rescue Plan Act. However, the Pension Benefit Guaranty Corporation (PBGC) has set rules that delay the full recognition of the bailout funds. This means Yellow could still owe money to 11 different pension plans.
Judge Craig Goldblatt agreed with the PBGC, saying the company must pay part of its pension debt. He also ruled that pension plans do not have to count bailout money until it is received.
Limiting Yellow’s Liability
Even though Yellow didn’t win its argument about the pension debt, the company did get some relief. The court put a 20-year limit on how much Yellow has to pay. This reduces its estimated liability to about $1 billion, a much smaller amount than the initial claims.
The court has asked both sides to work out the final amount of money owed. This will bring more clarity to Yellow’s remaining debts. However, Yellow still faces smaller claims from other pensions that did not get bailout funds.
