Yellow Corp. Settles pension claims for $526

Bankrupt less-than-truckload carrier Yellow Corp. Has reached settlement agreements totaling up to $526 million with four multiemployer pension plans. The deals resolve the remaining withdrawal liability claims against the defunct company and are supported by its largest shareholder, MFN Partners.

The legal battle began shortly after Yellow filed for Chapter 11 bankruptcy in August 2023. The new settlements would bring that multi-year litigation to an end.

The Settlement Details

Three pension funds are set to receive the bulk of the $526 million. The New York State Teamsters Conference Pension and Retirement Fund, the Western Conference of Teamsters Pension Trust Fund, and the Western Pennsylvania Teamsters and Employers Pension Fund are the primary beneficiaries. The New York Teamsters are specifically seeking court approval for a $300 million claim.

A federal bankruptcy court in Delaware has been asked to approve the plan. A court filing stated the settlement "will bring the current multi-year long MEPP litigation in these cases to an end … thus allowing the Liquidating Trust to begin making meaningful distributions to general unsecured claimants." If approved, the liquidating trust can make final distributions to creditors. Employee claims for paid time off and sick time have been classified as priority and will be paid.

As part of the agreement, MFN Partners has agreed to drop its pending appeals and will waive its right to file for certain legal fees and expenses.

The Disputed Liability

Yellow and MFN had previously contested the pension funds' claims. They argued that the multiemployer pension plans were fully funded after receiving federal bailout money in 2021, which they claimed left Yellow with no withdrawal liability. The company also contended that if any liability existed, the calculations used by the pensions and federal regulators were incorrect.

MFN Partners had purchased some claims from the pensions as a hedge, a move that was a point of contention during the three-year legal battle. The dispute centered on determining what Yellow owed after it abruptly ceased contributions to the pension plans.

The recent court filing argued that the new agreements would "save the estates years of continued litigation and allow creditors to receive meaningful distributions in a timely manner."

Financial and Legal Context

Yellow's financial situation was detailed in its monthly operating report for June. The report showed the company had paid out $293 million in professional fees and expenses since the Chapter 11 case began. It held $593 million in cash at that time.

The company's path to this settlement included a significant legal setback earlier this summer. The U.S. Supreme Court declined to take up Yellow's pension withdrawal liabilities case.

Yellow's collapse was swift and large-scale. The company terminated 3,500 nonunion employees on July 28, 2023. It then let go 22,000 union employees just two days later. Yellow officially filed for bankruptcy protection on August 6, 2023.

The settlement now awaits a judge's approval in Delaware.