(Bloomberg) — In terms of divestitures, trucking company Yellow appears to be enjoying particularly good company.
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After meme traders pile into stocks just as the company is collapsing, mutual funds and a rival truck driver compete for the chance to finance the downturn.
While the nearly 100-year-old company’s core shipping business has collapsed, it still boasts lucrative assets estimated at about $2.1 billion — helping Yellow get the kind of financing offers it struggled to raise before its recent Chapter 11 filing.
Yellow is scheduled to report to the bankruptcy court about its efforts to secure alternative financing in Friday’s hearing.
His loan from existing lenders led by Apollo Global Management carries a hefty interest rate of 17%. Yellow could also be on the hook for a $32 million fee if the sale drags on for months. The loan contains another provision to further protect about $501 million in debt owed to Apollo and other lenders.
Good news for the trucker: Hedge fund MFN Partners LP, its largest shareholder, has offered to loan him the same amount of money at the same interest rate but at a lower fee, according to Yellow Patrick J. Nash, an attorney. Rival shipping company Estes Express Lines put forward a proposal for more favorable terms, Nash said, offering up to $230 million at 2% lower interest and lower fees.
Nash said he’s “cautiously optimistic” that Yellow may be close to finalizing alternative funding by Friday.
“The prospect of multiple bids is a good thing, in my view, though it’s ironic that they’re funding a company that’s completely shut down,” said David Skill, a professor at the University of Pennsylvania Law School.
profitable assets
The trucker is in demand thanks to his large real estate portfolio that includes some 300 service centers, 42,000 trailers and 12,700 tractors — assets that Yellow told the bankruptcy judge should bring in more than enough to pay the lenders in full. She is famous for getting a $700 million loan from the US government during the pandemic bailout.
Nash said the company’s service centers are scattered across the country, many in fully developed metropolitan areas, where such stations are no longer being built. Nash said industry experts have described the bankruptcy as a “once-in-a-lifetime opportunity” to secure such a large volume of these types of assets.
The prospects are so promising, he said, that Yellow should also be able to take down additional debt to fund the Chapter 11 case.
However, existing lenders expressed skepticism on Wednesday about whether the alternative financing would pay off. An attorney for Apollo said the company has not reviewed Estes’ proposal and expressed concern that Yellow could lead to liquidation and negatively affect the value of the collateral.
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