Bankrupt trucking company Yellow Corp. and its hedge fund owners have lost a significant court ruling over $6.5 billion in pension debt, a development that is likely to eliminate most recovery options for the company’s shareholders, Bloomberg reports.
Last week, US Bankruptcy Judge Craig T. Goldblatt sided with pension funds in a dispute over how to calculate the penalty Yellow owes for canceling workers’ retirement plans after it ceased operations in 2023.
The decision gives the 11 pension funds involved an advantage in determining the size of the company’s “withdrawal liability” for terminating its pension obligations. While the exact amount has yet to be determined, this ruling makes it improbable that shareholders, including hedge fund MFN Partners, will recover any funds once Yellow’s real estate assets are sold off and the pension penalty is paid.
Yellow had sold its trucking terminals for $1.9 billion, covering its secured debt but not the pension liabilities. The company had argued that billions in federal grants received by the pension funds last year should be considered when calculating the penalty. The pension funds argued otherwise, and Judge Goldblatt’s ruling supports their position.
Following the court’s decision, Yellow’s stock, which had traded above $5 for most of the year, dropped by a record 88% on September 13, leaving shares valued at 70 cents as of Tuesday. The Pension Benefit Guaranty Corp., a federal agency overseeing pension plans, supported the funds’ stance, arguing that a ruling in Yellow’s favor could set a precedent for other companies to cancel pension plans without significant penalties.
