Yellow trying unique REIT approach to unsold terminals around country

Is bankrupt less-than-truckload (LTL) carrier Yellow Corp. a defunct trucking company or a fledgling real estate empire? Perhaps a little bit of both.

Yellow is asking a bankruptcy judge to approve a unique approach to its remaining 125 or so terminals that went unsold at auctions last year.

Yellow, which ceased operations last Aug. 7, is asking to place its remaining terminals and other vacant properties into a real estate investment trust (REIT) that could be used to raise money for creditors.

At least that’s the plan that Yellow’s bankruptcy advisers revealed to U.S. Bankruptcy Judge Craig Goldblatt in Wilmington, Del., on Monday.

Yellow and a committee of lower-ranking creditors, including the Teamsters union and other unsecured creditors, jostled over the idea. The Teamsters claim they are owed more than $7 billion in unpaid pension liabilities.

Judge Goldblatt gave Yellow attorneys 90 days to present their proposal on how to use the 125 properties it was unable to sell last year during a court-supervised auction. It also has roughly 27,000 pieces of equipment left to sell.

“We have valuable property,” Yellow Chief Restructuring Officer Matthew Doheny testified during a bankruptcy hearing.

The plan is to form a new company built on the remains of Yellow. The cargo hauler shut down and filed bankruptcy last year following a battle with the Teamsters union, which represented tens of thousands of company drivers. There is deep historic bad blood between the company and union.

The idea is to see if the company can raise more cash for creditors by keeping the properties than by liquidating them, Doheny said. Should the company raise enough money and successfully challenge some of the $10 billion in claims it currently faces, shareholders could wind up collecting something, he said.

Normally unsecured shareholders are wiped out in big corporate bankruptcy cases.

The creation of an REIT is a novel idea. Yellow owns 47 locations and has long-term leases on another 78, according to court documents. The company sold about 130 terminals for nearly $2 billion to rival LTL carriers such as Saia, FedEx Freight, Estes Express and others.

The company was in court Monday seeking more time to file a plan to end its bankruptcy. The unsecured creditors tried and failed to end Yellow’s exclusive right to put together a reorganization plan.

Meredith Lahaie, an attorney for the unsecured creditors, argued that Yellow’s bankruptcy was costing about $20 million a month. But that claim was rejected by Judge Goldblatt, who gave Yellow another 90 days to file its proposal.

“My overall conclusion is that the debtor has accomplished a great deal in this case and I’m persuaded that the debtor’s actions are consistent with an effort to maximize value for the benefit of all constituencies,” Goldblatt said from the bench.

Any future proposal does not include resumption of LTL activities. “That’s unfortunately never going to happen,” Doheny told the judge.