Dive Brief:
- Estes Express Lines would be the stalking horse bidder for Yellow Corp.’s real estate, with a $1.3 billion offer for all of the bankrupt LTL carrier’s 166 owned terminals, in a new debtor-in-possession financing deal floated in a federal court in Wilmington, Delaware, Thursday.
- Hedge funds Citadel and MFN Partners negotiated the proposal, which will be filed in a few days, an attorney representing Yellow told Judge Craig Goldblatt in an afternoon hearing. A committee representing creditors wants time to review the deal. Yellow needs financing in place by Monday.
- “We do still intend to seek the highest or otherwise best offers for all of the debtor’s assets, including the terminals, but are pleased that with the Estes bid in hand, nearly all of the preposition secured capital structure is covered by those contemplated proceeds,” the attorney, Allyson Smith of Kirkland & Ellis, said.
Dive Insight:
Estes’ bid for the terminals helps explain the privately owned, Richmond-based carrier’s interest in its bankrupt competitor.
Acquiring Yellow’s terminals could grow Estes’ footprint to nearly 450 terminals from the more than 280 it has today. For context, FedEx Freight says it operates about 400 service centers, and Old Dominion Freight Line has more than 255.
Estes offered $230 million in financing to Yellow last week before stapling its bid to Thursday’s $142.5 million proposal by Citadel and MFN Partners.
Apollo Global Management, once Yellow’s largest shareholder, sold its $500 million Yellow loan to Citadel this week, the Wall Street Journal reported. Smith told the judge Citadel pulled together the deal within the past 24 hours with Estes and MFN, which has gobbled up more than 40% of Yellow’s stock in the past month.
Yellow’s assets were appraised at $2.1 billion, which an attorney for the company said during a hearing last week is enough to cover its secured debts.
Unsecured creditors might not be so lucky. A committee of unsecured creditors, chaired by Central States Pension Fund, was appointed Wednesday and is meeting with counsel Friday, a representative said during the hearing.
Estes’ real estate bid includes a 2% breakup fee, and the new debtor-in-possession financing package contains several incentives that made it more attractive than Apollo’s initial offer, Smith said.
The agreement eliminates a roll-up clause and extends a 180-day maturity, “providing the flexibility for additional time to run a competitive sale process,” Smith said.
