💥What's $32mm Among Friends? Yellow Corporation, Part III.💥
Plus: NYC Real Estate Distress (540 West 21st Street Holdings LLC)
As you well know by now, on August 6, 2023 and August 7, 2023, less-than-truckload (“LTL”) shipper Yellow Corporation ($YELL, f/k/a YRC Worldwide Inc) and 23 affiliates (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the District of Delaware (Judge Goldblatt). The debtors’ filing was meant to kickstart an immediate marketing and sale process of the debtors’ assets — a process powered by a rich-AF DIP financing commitment from Apollo Global Management ($APO). We wrote about the filing and the original rich-AF DIP proposal here:
But the fun was just getting started.
As we discussed in our subsequent coverage…
…prior to the “first day” hearing, the debtors decided that they would no longer be moving forward with their attempt to secure interim approval of the Apollo DIP because, lo and behold, the near-term auction the debtors and Apollo expected to pursue got replaced with another competitive dynamic … an “auction,” of sorts (air quotes), to see who could provide the best DIP terms to the debtors!!
Enter Boston-based MFN Partners (“MFN”), a fund with a meaningful slug of the debtors’ equity and Estes Express Lines, a VA-based privately-owned LTL shipper. At the first day hearing, Pat Nash of Kirkland & Ellis LLP confessed to the rich-AF nature of the Apollo DIP while also reporting that MFN had expressed willingness to fund a cheaper DIP on a pari passu basis with Apollo (PETITION Note: you’ll recall that Apollo and the other B-2 lenders like Beal Bank hold a first priority lien on certain collateral, while the US Government holds a first priority lien on another batch of collateral, i.e., recently acquired rolling stock a/k/a trucks). Estes, meanwhile, had indicated a willingness to offer a junior DIP but talks hadn’t yet progressed to the point of that negotiation emerging out of concept stage.
Days later at a status conference before Judge Goldblatt on Friday, August 11, 2023, the debtors highlighted the progress that had been made. Mr. Nash indicated that term sheets were coming in hot with the debtors simultaneously negotiating with Estes and MFN, which was now apparently willing to come in junior to Apollo and the other B-2 lenders. How hot? Well, per Kirkland & Ellis LLP’s Patrick Nash:
“[The debtors] have received a number of inbounds, believe it or not, from other parties who say they’re prepared to provide the new money on a junior basis, one of whom has retained counsel and we’ve been in contact with that party’s counsel.”
At this point, Pat, we believe it. What’s another DIP proposal or two to ramp up the drama?
The folks at MFN must be feeling pretty darn good about how things are playing out; they caught wind of that rich-AF Apollo DIP and decided they’d throw a monkey wrench in Apollo’s plans; as large equity holders, they didn’t want to see any unnecessary value leak on account of ultra-high interest rates and exorbitant fees. So, they came in hot with an alternative (and notably cheaper) proposal, not realizing that they’d greased the skids for others to get in on the fun. MFN be like:
For their part, the debtors be like:
And Mr. Nash and the fine folks at Kirkland be like (wary about pissing off Apollo?):
MFN, frankly, couldn’t care less whether the debtors decide to go with their proposed DIP financing package or someone else’s; they, as their counsel, Eric Winston from Quinn Emanuel Urquhart & Sullivan LLP, put it:
“[We w]ant to make sure that whomever is the DIP lender, if it’s MFN or somebody else, that it allows for the estate to have a robust marketing process; doesn’t give a leg up to anyone that’s interested in bidding. And if it’s us, great, if it’s somebody else, that’s fine. But it should be not only the most efficient economically, but efficient to allow for that robust marketing process.”
In short, “big timeline good, big proceeds good, MFN want big timeline to get big proceeds.”
