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💥What's $32mm Among Friends? Yellow Corporation, Part IV.💥
On August 6, 2023 and August 7, 2023, less-than-truckload (“LTL”) shipper Yellow Corporation ($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) to pursue a sale (non going concern) of all or substantially all of their assets.
As we discussed in our initial coverage (Part I), the filings featured a proposed DIP credit facility from pre-petition B-2 term lender, Apollo Global Management ($APO), that pretty much every human being on the planet and all of the aliens in space could agree was — once you factored in all of the fees and whatnot — rich-AF (technical term) under basically any circumstances. And so we snarked, “[w]hat’s $32mm among friends?” only to answer our own question in our subsequent coverage (Part II)…
…it’s a lot.
The subsequent 12 days got cray cray.
As we discussed in Part III of our YELL coverage, other parties emerged with offers to lend on far less onerous terms, sparking a process that, as we learned from a status conference held before Judge Goldblatt on August 17, 2023, catalyzed a tremendous result for the debtors’ estates and their stakeholders.
Let’s catch you up.
You’ll recall that both large equity holder MFN Partners and third-party Estes Express Lines ultimately1 offered to lend into the debtors’ capital structure junior to the existing B-2 term lenders, Apollo and Beal Bank. This caused Apollo to b*tch and moan about the process and how life is unfair and boo hoo it needs adequate protection boo hoo yada yada yada and then, sensing it no longer had the opportunity to juice fees out of this (yellow yet increasingly tasty) lemon, Apollo tucked tail and ran at the very first opportunity. In what Kirkland & Ellis LLP attorney Allyson Smith dubbed “another twist” in these cases, both Apollo and Beal Bank exited stage left along with their respective counsel, Milbank LLP and White & Case LLP — selling their stakes in the B-2 loan (reportedly at par) to Citadel Credit Master Fund LLC (“Citadel”).
Wait. No.
White & Case ain’t going anywhere. Here’s a live shot of White & Case LLP’s Scott Greissman after getting word that Beal Bank had peaced out (updated case roster here):
Citadel wasted no time getting in on the action and quickly extended its own DIP proposal — a proposal that the debtors indicated on Thursday they’d accepted in principle.
What’s that proposal? The debtors filed the term sheet on Friday at Docket 297 (which, if you’re really interested, ought to be reviewed in its entirety):
Initial Commitment. $142mm of new money with Citadel contributing $100mm in new money pari passu with the existing B-2 loan and MFN contributing $42.5mm in new money second to the B-2 loan collateral and junior to the rest of the secured collateral. There’s no longer any roll up.
Fees. Both institutions will make 4% in fees.
Interest. MFN will earn interest at a rate of 15% (per annum) while Citadel’s new money will earn interest at the same rate provided under the B-2 credit agreement (ABR + 8.5%).
Subsequent Loans. The agreement bakes in the possibility of incremental new money later in the form of a $70mm delayed draw from MFN on a completely junior basis at ABR+10% (paid in cash monthly) plus a 7.5% exit fee.
Funding Timing. $60mm upon entry of an interim order, $17.9mm from MFN’s junior DIP and $41.2mm from Citadel’s post-petition B-2 facility. The second draw will be when the debtors file a revised bidding procedures form of order.
Bid Procedures Order. MFN has consent rights on the sale order which shall permit the B-2 lenders to credit bid the full amount of the B-2 obligations. MFN has no right to credit bid the junior DIP under the term sheet.
Carve Out. The DIP term sheet leaves open the possibility of an additional carveout of $1mm for an official committee of equityholders.
Maturity. 180 days.
But wait!
