Defunct cargo carrier Yellow Corp. is exploring the possibility of placing its remaining cargo terminals and other vacant properties into a real estate investment trust (REIT) as a means to generate funds for its creditors, according to bankruptcy advisers. This proposal emerged during a contentious bankruptcy court session on June 3 in Wilmington, Delaware, involving company officials and a committee of lower-ranking creditors.
Initially, Yellow Corp. had indicated plans to liquidate the 125 properties it was unable to sell in a court-supervised auction last year. However, Chief Restructuring Officer Matthew Doheny testified that the company possesses valuable property assets. Over the coming weeks, Doheny and his team will assess investor interest in forming a new company from Yellow's remaining assets. The goal is to determine if maintaining the properties would yield more cash for creditors compared to liquidation. If successful in raising sufficient funds and challenging some of the $10 billion in claims, shareholders might recover some value, which is rare in large corporate bankruptcy cases.
One potential strategy involves creating a REIT to manage at least a portion of Yellow’s properties. The company currently owns 47 locations and holds long-term leases on an additional 78, as revealed in court documents and testimony. This approach aims to maximize the value of the assets, considering the frenzy among other trucking companies to purchase valuable terminals from Yellow during its bankruptcy proceedings. The company has already sold approximately 130 locations for nearly $2 billion since filing for bankruptcy in August.
During the June 3 court session, Yellow sought an extension to file a reorganization plan. The official committee of unsecured creditors attempted, unsuccessfully, to terminate Yellow's exclusive right to propose this plan, arguing that the ongoing bankruptcy proceedings were incurring costs of about $20 million per month. U.S. Bankruptcy Judge Craig Goldblatt granted Yellow an additional 90 days to file its proposal, denying the committee’s request.
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