Yellow Corp. bought more time as it fights for survival with a deal that waives certain covenants under its credit agreements.
The agreement was effective retroactive to June 30 and filed with the Securities and Exchange Commission late Friday.
According to the 8-K filing with the SEC, the amended and restated credit agreement between the LTL carrier and a consortium of lenders did have a testing deadline for covenant compliance on June 30. That now has been delayed.
In a prepared statement released to FreightWaves, Yellow said the agreement for one quarter was with the U.S. Treasury and for two quarters with its term lenders.
The agreement also waives a covenant compliance deadline that had been in place for Sept. 30. The waiver in question is described as testing Yellow’s compliance with a “minimum consolidated EBITDA financial covenant.”
As part of the waiver agreement, the lenders will require Yellow (NASDAQ: YELL) to provide its lenders with regular reports on the state of its finances.
Beginning Wednesday, Yellow will be required to provide the lenders with a weekly “liquidity report.” In that report will be the total amount of liquidity at Yellow, including unrestricted cash on hand, cash on hand that is held for payroll and to settle contracts, and the amount of money — defined as “availability” — that the company is holding.
One piece of positive news for Yellow is the requirement that liquidity not fall below $35 million. Elsewhere in the 8-K, liquidity at Yellow is said to be in excess of $100 million.
The lenders will also appoint an operational adviser at Yellow. That person, according to the SEC filing, “will, among other things, provide financial planning and analysis services and assistance creating the aforementioned budgets.”
The budget reference is to a requirement that beginning this week, Yellow must deliver weekly to the lenders a 13-week “consolidated operating budget and a budget variance report.” The report will spell out actual results against the amount budgeted in the 13-week period. Beginning in two weeks, a monthly supplement to each budget will be required under the terms of the waiver.
Yellow will be getting other hands-on involvement from the lenders. Under the agreement, they have the right to designate a representative who would be a “non-voting observer” of any meetings of the company’s board of directors or committees of the directors. The agreement also calls for a weekly call with the operational adviser and monthly calls with Yellow’s senior management.
“We are pleased that Yellow has successfully negotiated adjusted EBITDA covenant waivers to its existing credit agreement,” Yellow said in its statement. “This, along with liquidity preservation efforts such as requesting to defer select health welfare and pension payments for July and August should give us additional runway to negotiate with the [Teamsters] on a solution that provides material wage increases and aligns both parties on modernization of the company.”
A report issued Monday morning by the transportation team at Deutsche Bank led by Amit Mehrotra said the “bottom line” in the agreement is “the precarious position of YELL, in our view. Lenders are clearly taking a much more active approach on the day to day operations than ever before. We think this is more noteworthy than the limited waivers, given potential for additional business to exit the company as customers divert volumes.”
The report also noted that the liquidity at Yellow said to be in excess of $100 million is still down from a figure at the end of March of $168 million.
“Our customers want us to be here, even with all the noise around the company our shipment counts have held up and that’s crucial for us to work through this period while we get to negotiations,” Yellow said in its statement to FreightWaves.
The SEC filing also disclosed that Yellow has recently sold an “obsolete” terminal in Compton, California, for $80 million. Yellow said the sale was “consistent with our modernization strategy and will not have a material impact on jobs.”
S&P downgrades Yellow debt
The waiver agreement comes just days after a second ratings agency downgraded the publicly traded debt of Yellow.
S&P Global Ratings last week cut the company’s rating to CCC-. Ironically, even as conventional wisdom has Yellow on the brink of collapse, the rating given by S&P Global Ratings still has room to fall on its way to a rating of D or SD, which occurs when a company is deemed to have defaulted on its debt. (SD stands for selective default and is often given to debt that is restructured rather than suffering an outright default.) S&P has a group of ratings under a classification of C or CC that is below the CCC- rating now applied to Yellow.
But the S&P action from Thursday takes its rating of Yellow to a level less than that of Moody’s, which moved down its rating on Yellow in late June. The Moody’s action set Yellow’s rating at Moody’s (NYSE: MCO) to Caa1. The CCC- rating at S&P Global (NYSE: SPGI) is generally seen as two notches less than Caa1, which aligns with an S&P rating of CCC+.
The S&P Global downgrade said Yellow faces “significant” debt maturities into 2024, with a $567 million senior secured term loan that is due in June 2024 and a loan from the U.S. Treasury of $729 million issued by the Trump administration in 2020 that is also due in 2024.
The S&P report on its downgrade also noted the reluctance of the Teamsters to negotiate with Yellow. “We believe contentious labor contract negotiations will make it more difficult for the company to implement its new operating strategy across its central and eastern network,” the report said. “In our view, Yellow will need to address both maturities and the labor contract to avoid a default.”
As well as lowering the rating on Yellow debt, S&P Global Ratings listed the outlook for Yellow as negative. “The negative outlook reflects our expectation that Yellow is vulnerable to a payment default or distressed exchange over the next 12 months.”
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3 million miles
Ok lets clear a few things up.
Fact: There aren’t any negotiations ongoing because the contract doesn’t expire until I April ’24.
Fact: Yellow stopped their Change of Ops in December in a letter to the Teamsters. Saying (paraphrasing) they had some issues to work out and were not going ahead with Phase 2 in January as planned and would not proceed until “late Spring but probably Summer.” Also that they were open to ideas. Yes open to ideas on how to fix their Phase 1 issues in the west. What the ____?
Fact: YELLOW said nothing until late May early June (?) when they wrote a Letter of Agreement and sent it to the Teamsters saying that Phase 2 had to go through now with very unreasonable demands that broke the contract. Then when called out by the IBT they responded with Hawkins whining about how they needed to have the work rule changes now or they were going to shut down because they were out of money and proceeded to go on a lying PR campaign about how the IBT wouldn’t negotiate with them after YELLOW being silent about it since December. How is it that future work rule changes will instantly give them millions of $ to keep operating NOW?
Fact: IBT said if you want the changes then open the contract a year early and lets negotiate now. Go on Twitter and look at the text messages that Teamster President O’Brien screenshotted of the text thread between him and Hawkins Yellow CEO. Hawkins won’t respond.
Fact: Yellow management has wrecked every company they’ve ever touched.
Fact: The Teamsters (the workers) have kept this company open in spite of garbage management right out of their own pocket. 15% pay cut and no raises for years. Those is the east saw their pensions not funded for years, those of us in the west LOST our pension fund. Gone. Worst pay in the LTL industry. Worst equipment in the LTL industry.
Fact: Management above the terminal level does not ask any questions they just demand unreasonable results. Their precious Phase one in the west has been a disaster that they keep doubling down on. Wait time for drivers has been off the charts compared to before. They had to bring “travelers” from the east to augment the west because they didn’t have enough drivers to move the freight through the “new lanes.” Funny we had no problem the day before the change of ops started.
They want all these wonderful Utility Driver positions to drive and work the docks so they have to cut the lengths of the runs so they can work the dock.
THE FREIGHT STILL HAS TO MOVE THE SAME NUMBER OF MILES SO NOW YOU NEED A LOT MORE PEOPLE!!!!! How stupid are these dopes?
Ok I’ve said a lot about management now here comes the truth on Yellow Teamsters. There is a HUUUUUGE difference between Yellow/YRC Teamsters and Reddaway Teamsters and I’m sure its true with Holland and New Penn Teamsters too. The YRC people are TERRIBLE AND LAZY COSTING US MILLIONS. They constantly drag their feet wasting the time of fellow Teamsters because they are angry with mgt. and they are only about getting their”clicks.” The clock clicking off minutes because they get paid by the minute for everything they do or MOSTLY DON’T do. This is widely encouraged. It’s embarrassing and there is no way that these jack wagons could have worked at Reddaway Holland or Penn. There is no comparison. All of us that weren’t YRC before are disgusted to be a part of this now. I almost make the same amount now after the change of ops on a 400 mile run as I did on the 550 mile run I lost in the change. It’s all because of the massive amount of wait time. Me waiting for someone else to show up at our meet because of the snowball effect.
Reddaway Holland and Penn all made money and all the acquisitions of our companies is what kept YRC afloat the last two decades. Now with the integration the chickens are coming home to roost. All of us have zero confidence in executive management. We’ve been walking around wondering when the string thats holding the anvil above our heads in gonna break and finish us off once and for all. Thats no way to live and work we didn’t cause that.
I just checked and my pay slip thats always available on Tuesday to see what my deposit is still isn’t up yet. Will I get paid this week? They need to pay our health insurance bill by Saturday or we don’t have it and any health care we’ve used since July 1st we are personally on the hook for. We didn’t do that.
Billions in give backs from the Teamsters who work here $700 million plus from the tax payers, the destruction of Reddaway Holland and New Penn and they are crying poverty again, or are they crying wolf, again?
I seriously can’t afford the stress anymore so I seriously can’t care. I’ll miss the folks I work with, or I won’t but it’s not up to me.
Craig
Don’t trust yellow. They been lieing for the past 13 years. If they couldn’t do this taking 15% from each employee and freezing the pension for 13 years what really makes you think they will do this. The Board CEO COO CFO gonna take big pay cuts??? Hell no they didn’t befor. What are they gonna do for past and present employees with the pension ???
Your Mom
Let’s call the Teamsters what they truly are, thugs. Union drivers are in for a rude awakening when they realize that non-union trucking companies will not hire them.
Jeff
Without replacing the ego driven top heavy management at at Yellow it will not survive. Yellow is driving the company full speed into the ground by design and nobody seems to care…Hmmm. I guess we should ask the question who benefits if Yellow goes down. Follow the money and you’ll get your answer. Yellow treats the employees like garbage and customers hate using Yellow. It will fail if the phase 1, phase 2 take place. The company is buckets of cash every day to show a loss.
John Kopp
The Teamsters gave billions in concessions to the company. The government (taxpayers) gave 100’s of millions in concessions to the company, all at the behest of the lenders. Well lenders, now it’s your turn. Have a nice day.
Dennis m.Safrit Sr
All they have to do is the audit.2019 through 2021 then compare 2022 through April 30th 2023 hold time dead head n bob tail everyone will be completely shocked on the hold time. This is when they drop the stupid bomb starting January of 2022 and the whole thing tanked
Wayne Phillips
Freight Zippy has no concerns for the employees and doesn’t care how much the Union employees have lost not only in their pensions every month but in mileage and hourly pay. We older retired teamsters have seen this play out for years ever since the deregulation trucking bill passed and non union lines were started. Union lines gave an employee time with family Instead of the employees living in the cab of a truck for days weeks and even months. Check the turnover rate in non union trucking versus union trucking companies. Biggest problem in trucking no home life and pay truckers miss funerals wedding birthdays holidays family reunions most everything it’s like they don’t exist with nonunion lines.
DC
In the next 13 weeks the board should replace EVERYONE in senior management. This nonsense has gone on for too long.
The Teamsters are willing to negotiate however Yellow hasn’t offered any further options according to a couple of sources. This is a typical Darren Hawkins move , blame the union for the company’s issues which is basically blaming the rank and file.
The number 1 issue is Hoffa Jr. specifically he ain’t here to roll over and play lap dog in his place is a pit bull that has the determination and tenacity to take a stand and not waiver.
Since the Yellow buyout of Roadway it’s been a sh’t show. Right off the bat YRC management sold a bill of goods to the rank and file as well as mid level management saying they (we) needed to give back %15 or the company wouldn’t survive. What a business plan huh ? Jr. Couldn’t wait to put it to a vote and mysteriously it passed.
1- it should’ve never been put to a vote
2- I don’t trust anything that’s basically a secret ballot and outside of a lawsuit the actual results are not available
3- we now have a president that actually has a spine and the C suites can’t deal with that.
#teamsterproud