Yellow Corp. was granted a waiver by its largest lender, the U.S. Treasury, for EBITDA to drop below an agreed-upon floor of $200 million, and the carrier sold a California terminal to help pay off debt, according to a securities filing Monday.
The financial covenant requiring earnings before interest, taxes, depreciation and amortization to remain above $200 million will next apply in Q3, the period ending Sept. 30, according to the filing.
“We are pleased that Yellow has successfully negotiated adjusted EBITDA covenant waivers to its existing credit agreement for one quarter with the U.S. Treasury and two quarters with its Term Loan Lenders,” the company said in a statement.
As part of the agreement, the company closed on the $80 million sale of a Reddaway terminal in Los Angeles’ Compton neighborhood to a third-party buyer, ULH Properties of California, and put the $79.5 million in proceeds toward its outstanding loan balance, the filing said.
The Reddaway site is among more than two dozen excess, end-of-line facilities the company is offloading as it consolidates its operating companies and pays $1.6 billion in debt obligations in the next three years.
“This move is consistent with our modernization strategy and will not have a material impact on jobs,” Yellow said in an email to Transport Dive. “Under One Yellow, we intend to grow jobs, including union positions throughout the U.S.”
The request for and granting of the waiver is another sign of persistent demand softness dragging Yellow’s earnings. The company reported 12-months EBIDTA of $325.4 million in Q1, down from $341.4 million the year before, and quarterly EBIDTA of $34.3 million, down from $52 million in Q1 2022.
Some shippers have begun diverting freight from the nation’s third largest LTL carrier amid uncertainty about the company’s future, analysts said in a recent report.
The Treasury waiver comes with additional requirements for Yellow.
The carrier’s liquidity — which dropped to $167.5 million as of March 31 from $276.9 million in Q1 2022 — is not permitted to fall below $35 million.
Yellow agreed to a host of additional financial reporting requirements, including weekly liquidity reports, 13-week consolidated operating budget and budget variance reports, a monthly report of key performance indicators and weekly lender calls.
Yellow must appoint an operational advisor by Wednesday, July 12, “who will, among other things, provide financial planning and analysis services and assistance creating” budgets required by the loan amendment.
The company also agreed to allow its lenders to designate a non-voting representative to its board of directors.
The agreement followed Yellow’s request for intervention from the White House to bring the International Brotherhood of Teamsters back to the table amid stalled negotiations over the second phase of the carrier’s One Yellow network overhaul.
At an impasse, the company resorted to suing the Teamsters for $137 million last month, accusing the union of “unjustifiably blocking” its modernization strategy.
In its statement Monday, Yellow touted the additional financial leeway negotiated with its lenders and liquidity preservation efforts “such as requesting to defer select health welfare and pension payments for July and August.”
The moves “should give us additional runway to negotiate with the [International Brotherhood of Teamsters] on a solution that provides material wage increases and aligns both parties on modernization of the company,” the company said.
