Ideas Elsewhere: Yellow Corporation (YELLQ)

Equity Recovery in Bankruptcy


This is a very high-risk and high-reward bankruptcy case of trucking company Yellow Corporation. The situation was recently highlighted on Twitter by DetiEth. It’s a bankruptcy aimed at complete liquidation of assets and debt repayment with equity holders receiving whatever remains. The outcome is uncertain and equity holders could lose 100% of their investment.

The battle for the equity holders is now led by MFN Partners, which has recently acquired a 43% equity stake in YELLQ and provided the DIP financing. MFN is a very reputable hedge fund co-founded by a former partner at Baupost Group. The recovery for equity holders will depend on two factors: (1) the proceeds from the sale of its assets, which mostly consist of trucks and real estate; and (2) the outcome of its legal battle with the International Brotherhood of Teamsters, the largest private sector labor union in the US, over the size of Yellow’s wage and pension liabilities.

The equity could be a 10x bagger from here if YELLQ will successfully negotiate Teamsters’ wage and pension liabilities downwards and if the assets will get sold close to the recent management’s estimates or the recent bid value from a competitor. The bankruptcy court might view YELLQ equityholder claims favorably given that Teamsters’ labor union has caused a ‘bank-run’ among YELL’s customers and in turn, has played a large role in driving the company toward bankruptcy.

Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I do not intend to actively follow the developments of these ideas, so you should expect limited updates or follow-ups in the comments section.

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