The competition heats up as more bids for Yellow’s terminals are expected on top of the many they have already received.
The corporation announced on Aug. 6 that it was seeking Chapter 11 bankruptcy protection. This announcement caused two major LTL trucking companies to give an initial offer on the assets of a bankrupt company.
Estes Express Lines announced a $1.3 billion bid for the terminals Aug. 17. Old Dominion Freight Line then offered $1.5 billion to acquire the terminals Aug. 18.
The two companies pitched stalking horse bids, which is a low-end offer that sets the bar so others cannot underbid the purchase price.
Privately held Estes angled for a bargain with the first stalking horse bid, Bank of America Securities Research Analyst Ken Hoexter told Transport Topics.
Hoexter goes on to say that stalking horse bids make it much more difficult for competitors to also place bids and may result in Yellow selling their terminals in smaller batches.
Estes said in a statement on Aug. 17 that it was “important to try to bring a proposal to the Yellow bankruptcy estate and its creditors that would add some value for the benefit of all case constituents and reduce some of the uncertainty surrounding this bankruptcy process.”
Old Dominion Freight Line declined to comment.
Estes will not be providing Yellow with a loan of $230 million, which would be used to keep the corporation running while they work on selling their assets.
In lieu of this loan, MFN Partners will work in collaboration with hedge fund Citadel Credit Master Fund to fund a combined $142.5 million while Yellow winds down operations, the corporation’s attorney, Allyson Smith told the court.
Citadel Credit Master Fund bought out Apollo Global Management’s $485 million loan to Yellow on Aug. 11. Making them the largest shareholder of the debt
The terms of the loans were much more favorable to Yellow than what Apollo was offering, Yellow attorney Allyson Smith told the bankruptcy court Aug. 17, noting that the debtor-in-possession fee would be 4% rather than 22%-34%, equating to savings of between $27 million and $42 million for Yellow.
“This is a chance to get a lot of really good terminals,” said Lee Clair, managing partner at management consultancy firm Transportation and Logistics Advisors.
“These are opportunities you just don’t get that often,” said Hoexter.
Ken Adamo, chief of analytics at DAT Freight & Analytics, said he would not be surprised to see LTL carrier Saia Inc. or Greenwich, Conn.-based XPO Inc. enter the auction.
Saia CEO Fritz Holzgrefe said in an interview on Aug. 24, “As part of our long-term planning, we continue to look for opportunities to expand our service area and enhance the service we offer our customers. To the extent that real estate becomes available across the industry, we will consider potential opportunities to enhance our coverage.”
“There are terminals in the network that are worth a lot of money, some that are worth something and others that will be sold,” Clair said.
“When you have a chance to accelerate your build out and get that many properties at the same time, there’s value to that,” said Hoexter.
