Yellow Corp.
Yell Truck 2

Hedge fund wants to fill Yellow board seats

Aug. 28, 2023
The leaders of MFN, who own more than 40% of the shuttered carrier’s stock, have submitted one name and plan to put forward another candidate soon. It also is trying to keep around key Yellow employees through looming auction process.

The largest holder of Yellow Corp. shares has asked the company’s directors to fill two vacant board seats and set up a special pay plan to keep around executives and others to sell off assets under the auspices of its bankruptcy case.

Boston-based investment firm MFN Partners Management said in a U.S. Securities and Exchange Commission filing late last week that it had sent a letter to the board of Nashville-based Yellow, which filed Chapter 11 papers Aug. 6 and is looking to liquidate its national real estate portfolio and its fleet of 12,700 tractors (about 1,000 of them leased) and 42,000 trailers (of which 7,200 are leased).

In their letter, MFN’s principals—who this summer quickly built up a 42% stake in Yellow—requested that the former No. 6 on the FleetOwner 500 elect people to two board seats vacated nearly a month ago by Matt Doheny, now Yellow’s chief restructuring officer, and Javier Evans. The SEC filing also says the MFN team has submitted a candidate to fill one of the two seats and plans to put forward a second person “in the near future.” The investors say both people have “deep and relevant experience in structuring, implementing, and/or overseeing value-maximizing transactions in special situations.”

See also: Can smaller fleet operators gain any of the freight left by Yellow?

Details about the candidates have not been made public in either SEC or bankruptcy court filings, and representatives of both Yellow and MFN did not return requests for comment late last week.

MFN’s leaders sent their letter to Yellow just days after helping finalize a financing package that will have their firm provide Yellow $42.5 million to help Yellow close up shop. (Fellow hedge fund Citadel is committed to providing another $100 million as part of that so-called debtor-in-possession funding, and Old Dominion Freight Line, No. 10 on the FleetOwner 500, has offered a stalking-horse bid of $1.5 billion for most of Yellow’s terminals.)

Placing representatives on the board wasn’t the only agenda item in MFN’s letter to Yellow last week: The firm also asked the defunct carrier’s directors to consider setting up a “key employee incentive and retention program” to incent company leaders to stick around during the looming auction process. Such programs, also regularly called “pay-to-stay” plans, are used regularly in bankruptcy cases and are typically structured around critical milestones. But they also can stir up controversy because bankruptcy law limits what troubled companies can pay insiders during the process. (Here is a discussion of some of the factors in such debates from a Weil Gotshal & Manges attorney.)

A successful auction is of particularly great interest to MFN: It and other equity holders are at the back of the line of people to be paid with auction proceeds. (The federal government, which owns 30% of Yellow’s stock, is both at the front of the line—courtesy of a controversial pandemic-era loan it made to the company—and at the back as an equity investor.) Since early this month, MFN and its attorneys have successfully pushed for an extension to the planned timeline of Yellow’s wind-down to, ideally, bring in more money. Initially, Yellow CEO Darren Hawkins, Doheny, and their team targeted Oct. 18 as the final auction date, a 10-week window one expert called “very aggressive.”

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications FleetOwner, Healthcare InnovationIndustryWeek, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.

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