Creditors to bankrupt Yellow Corp.’s estate said its advisers are “no closer to a chapter 11 plan” than they were two months ago when a Delaware bankruptcy court extended them another 90 days to plot a course to best liquidate the remaining assets. The official committee of unsecured creditors to the estate asserts that “these cases continue to languish in chapter 11” while professional fees mount.
A Thursday filing with the court said the debtors’ advisers have asked for an interim allowance of more than $40 million for the repayment of fees for the three-month period ended April 30. The committee itself is asking for an allowance of $10.6 million in professional fees for the same period.
“The continued accrual of significant professional fees without any cognizable progress toward the filing of a chapter 11 plan has exacerbated the Committee’s concerns regarding the extent of the administrative expenses being borne by the Debtors’ estates,” the filing read.
The committee said it is pursuing a “more expeditious path,” which could include objecting to further exclusivity period extensions and potentially “more draconian relief” now that the first anniversary of Yellow’s bankruptcy filing has passed.
The court gave Yellow a third exclusivity extension on June 3. The extra 90 days means the company’s advisers can exclusively oversee the liquidation, preventing other financial firms from proposing competing plans. Yellow argued that those plans could have included a fire-sale approach, potentially minimizing recoveries to creditors and shareholders. The court ruled the extension was warranted given the success Yellow’s handlers were having selling off its assets.
Yellow has sold more than 160 terminals, which generated $2 billion in proceeds that were used to repay all funded debt. More than half of its 60,000 pieces of equipment – mostly tractors and trailers – have been auctioned as well. However, the bulk of the terminal sales closed months ago, and there are nearly 100 properties left to move, along with the remaining equipment.
Yellow floated the idea of establishing a real estate investment trust in June to maximize the value of the remaining properties, but some creditors remain skeptical, saying the company is dragging out the process trying to hit a home run for shareholders.
The committee believes a lack of progress as the meter continues to run threatens not only returns to equity holders, which it claims the company is beholden to, but also to creditors. It acknowledged that the debtors had presented a settlement proposal but said the plan “raised more questions than answers.”
“The proposal also did nothing to alleviate the Committee’s concerns that the Debtors are continuing to risk unsecured creditor recoveries in furtherance of providing outsized economics to certain equity holders notwithstanding the fact that under virtually every conceivable recovery analysis, equity holders are out of the money in these cases,” the filing stated.
It said the company has been solely focused on fighting legitimate claims that it believes could be reasonably resolved, and fixated on a $137 million breach-of-contract lawsuit against the Teamsters union, which a federal court in Kansas has already dismissed.
Yellow previously said some of the professional fees were incurred sorting through duplicate and overstated claims. It said its role as a fiduciary requires it to pay only legitimate claims. It also said the bulk of the litigation costs shelled out for its suit against the Teamsters are already sunk and that incremental costs to pursue the action are de minimis.
A June operating statement for Yellow showed it had $320 million in cash, a $4.7 million increase during the month as it took in more in than it paid out. However, the timing of the receipt of proceeds and the payout of approved disbursements could be a factor skewing the change. The estate has incurred more than $100 million in professional fees in total.
Some of the larger claims against the estate that haven’t been resolved include more than $7 billion in pension withdrawal liability claims; $244 million in WARN Act claims by former employees who say they weren’t properly notified ahead of mass layoffs; and an environmental action by the Department of Justice over alleged violations.The bankruptcy court overseeing the liquidation could soon rule on the liability claims.
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