Yellow Corp. Resolves $526M Pension Claims After Bankruptcy
Bankrupt Yellow Corp. settles remaining pension claims for up to $526 million
Defunct less-than-truckload carrier Yellow Corp. has reached agreements with four multiemployer pension plans to resolve the remaining withdrawal liability claims stemming from its 2023 shutdown.
The settlements total as much as $526 million and are supported by MFN Partners, Yellow’s largest shareholder. If approved by the U.S. Bankruptcy Court for the District of Delaware, the agreements would end the central legal dispute over the company’s pension obligations and clear a path for additional payments to former employees and other creditors.
Yellow filed for bankruptcy on Aug. 6, 2023, after abruptly ceasing operations. The company terminated about 3,500 nonunion employees on July 28 and roughly 22,000 union employees two days later. Its shutdown left pension funds seeking payment for withdrawal liabilities, which are obligations imposed when an employer leaves a multiemployer pension plan.
The four plans involved in the remaining claims include the New York State Teamsters Conference Pension and Retirement Fund, the Western Conference of Teamsters Pension Trust Fund and the Western Pennsylvania Teamsters and Employers Pension Fund. The New York State Teamsters fund is seeking approval for a claim of approximately $300 million, with the other plans receiving the balance under the agreements.
Yellow had previously reached settlements with most of the multiemployer pension plans to which it contributed on behalf of its employees. The latest agreements address the remaining claims and are intended to resolve a legal fight that has continued for roughly three years.
Settlement would allow distributions to move forward
The pension claims have been a significant unresolved issue in Yellow’s bankruptcy case. The company’s assets have been liquidated, but final distributions to creditors have been delayed while the pension liability dispute continued.
A liquidating trust overseeing the bankruptcy estate said the settlements would avoid years of additional litigation and allow meaningful distributions to general unsecured creditors to begin in a timely manner. The agreements still require court approval.
Employee claims for unused paid time off and sick time have been classified as priority claims and are expected to be paid. The timing and amount of payments to other creditors will depend on the bankruptcy court’s approval of the settlements and the remaining funds available in the estate.
Yellow’s estate has raised significant proceeds through asset sales. Approximately $2.4 billion came from real estate sales, while fleet sales generated about $176 million in net proceeds. Those funds have been used to pay secured debt, bankruptcy financing, professional fees and other expenses.
Recent estimates indicated that between $600 million and $700 million could remain for outstanding claims, including the pension settlements and claims from former employees. The pension agreements therefore represent a major portion of the funds available for the remaining distribution process.
Dispute centered on federal pension assistance
Yellow and MFN had argued that the pension plans were fully funded after receiving federal financial assistance in 2021. Based on that position, they contended that Yellow should not have been responsible for withdrawal liability.
The company also challenged the methods used by the pension plans and federal regulators to calculate the alleged obligations. The dispute reached the U.S. Court of Appeals for the Third Circuit, which upheld a Delaware court ruling that the federal pension assistance program did not eliminate Yellow’s withdrawal liability.
The U.S. Supreme Court later declined to take up the case. That decision left the parties to negotiate settlements rather than continue pursuing the broader legal arguments through the courts.
MFN also purchased some claims from the pension plans after previously objecting to them. The purchases were described as a hedge and became another point of contention during the bankruptcy litigation. Under the proposed settlement, MFN would withdraw its pending appeals and waive its right to seek certain legal fees and expenses.
What the deal means for former Yellow employees
For former Yellow drivers and other employees, the settlement removes a major obstacle to the bankruptcy estate’s distribution process. It does not create a new operating company or restore the jobs lost in the shutdown, but it could allow the liquidating trust to begin making additional payments once the court approves the agreements and the estate completes the required administrative steps.
The settlement also limits the estate’s exposure to further litigation costs. Yellow’s monthly operating report for June showed that approximately $293 million had already been spent on professional fees and expenses since the Chapter 11 case began. The company reported about $593 million in cash at that time.
With the remaining pension claims addressed, the bankruptcy court will determine whether the agreements are in the best interests of the estate and how distributions will be handled. Approval would bring the long-running pension dispute to a close and move Yellow’s bankruptcy toward its final phase.
