Yellow Corp. Explores REIT to Raise Funds Amid Bankruptcy Proceedings

Yellow Corp., a defunct cargo hauler, is considering creating a real estate investment trust (REIT) using its remaining cargo terminals and vacant properties to raise money for creditors. This proposal emerged during a bankruptcy court hearing in Wilmington, Delaware, on June 3.

Yellow Corp. owns 47 locations and holds long-term leases on another 78 properties. Initially, the company planned to liquidate the 125 properties it was unable to sell during a court-supervised auction last year. However, the company is now exploring the potential of a REIT to generate more cash for creditors than through liquidation.

Chief Restructuring Officer Matthew Doheny testified that Yellow Corp. has 'valuable property' and will test investor interest in a new company built on the assets of Yellow. 'We have valuable property,' Doheny stated during the hearing.

The creation of a real estate investment trust by Yellow Corp. has significant implications for the company's creditors and shareholders, plus the broader logistics and transportation industry. If successful, this move could set a precedent for other companies in similar financial situations to explore alternative ways to raise funds and restructure their debt.

Yellow Corp. filed for bankruptcy last August after a protracted dispute with the Teamsters union, which represented tens of thousands of its drivers. Following the bankruptcy filing, Yellow sold about 130 locations for nearly $2 billion. The company currently faces $10 billion in claims and is seeking to raise funds to address these claims.

During the June 3 hearing, U.S. Bankruptcy Judge Craig Goldblatt granted Yellow Corp. an additional 90 days to file a plan to end its bankruptcy. An official committee of unsecured creditors had attempted to terminate Yellow's exclusive right to put together a reorganization plan, arguing that the bankruptcy was costing around $20 million a month. However, Judge Goldblatt rejected the committee's demand.

The REIT proposal aims to determine if retaining the properties can raise more cash for creditors than liquidating them. If successful, shareholders could potentially collect something from the case, which is unusual in major corporate bankruptcy situations.

In the coming weeks, Doheny and other advisers will gauge investor appetite for a new company built on Yellow's remaining assets. The outcome of this exploration could significantly impact the company's ability to meet its financial obligations and provide some return to its shareholders.

Yellow Corp.'s bankruptcy case continues to unfold in the U.S. Bankruptcy Court for the District of Delaware, under case number 23-11069.

Key Takeaways

• Yellow Corp. considers creating a REIT to raise funds for creditors using its remaining cargo terminals and properties.
• The company owns 47 locations and holds long-term leases on 78 properties, worth potentially more than liquidation value.
• A REIT could generate more cash for creditors and potentially provide a return for shareholders, unusual in major bankruptcies.
• Yellow Corp. faces $10 billion in claims and has 90 days to file a plan to end its bankruptcy, granted by U.S. Bankruptcy Judge Craig Goldblatt.
• The REIT proposal's success could set a precedent for other companies in similar financial situations to explore alternative fundraising methods.