Struggling Yellow Freight has been thrown a lifeline by its creditors, but getting the vital support from its workforce remains a headache.

The spectre of bankruptcy has been averted, for now, after the trucking company’s debtors agreed to amended loan deals, under which they temporarily waive certain loan requirements in return for increased financial oversight.

These include a waiver for the six-month period to 30 September from term loan lenders. Beyond these agreements, Yellow management is seeking permission to defer select health and pension payments.

In return for the concessions from lenders, management had to agree to allow them to nominate an operational adviser and to submit weekly reports of consolidated operating budgets over a 13-week period, and monthly reports on key performance indicators. In addition, the company is obliged to keep liquidity above $30m.

Currently, Yellow’s liquidity is in excess of $100m, according to the company’s latest 8-K filing with the SEC. But overall, the company has debts of $1.2bn, including a $700m government loan through a Covid relief package.

For Q1, the company reported a net deficit of $54.6m, on revenues of $1.16bn, and an operating deficit of $9.3m. Management blamed the loss on soft demand and costs associated with a reorganisation of its operating units, a legacy of an assortment of takeovers from the early 2000s never properly integrated.

Last year, Yellow reorganised the western part of its network into the One Yellow brand. President and CEO Darren Hawkins and his team argue that the same move has to be carried out in the eastern US to unify regional operations under the same operating model, calling it essential for survival.

However, this plan has been opposed by the Teamsters union, chiefly over plans to convert more than 29% of the company’s road miles to third-party carriage, either rail or purchased transport. In addition, management has identified a string of trucking terminals as redundant and wants to sell them. One, in California, was reportedly sold for $80m.

The clash escalated to a $137m lawsuit filed by Yellow against the Teamsters last month, accusing the union of breach of contract resulting in lost market share and an inability to secure lending. The union claims the suit is unfounded and “frivolous” and made up of “baseless allegations”.

The current labour contract is valid until next year, but management wanted to address this early. However, the dispute has stalled contract talks, causing management to approach the federal government seeking help to get negotiations going. In a letter last month to the White House, management warned it was “on the verge of closing”.

With around 9% of the LTL market, Yellow is ranked 13th on the Transport Topics Top 100 list of the largest US for-hire carriers, and it is one of the few remaining unionised operators. By one estimate, their share of the LTL market has shrunk from over 40% in 2002 to 22% last year.

This has prompted comments that having a unionised operation was a drag on Yellow’s competitiveness and an obstacle to regaining financial health. However, several industry experts have argued that the company’s predicament is not the union’s fault. ABF, another unionised LTL outfit, has achieved revenue per shipment more than 50% higher than Yellow.

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