By Paul Berger

A bankruptcy judge ruled that failed trucker Yellow can't escape its pension withdrawal liability, dealing a blow to other creditors and sending shares in the remnants of the business spiraling downward.

Judge Craig Goldblatt, in a ruling late Friday, said Yellow is liable for billions of dollars in unfunded pension benefits for its 22,000 workers after it went out of business last year.

The decision will severely limit how much Yellow can pay out to unsecured creditors, ranging from one of the country's biggest railroads to a slew of mom-and-pop businesses. It will also hit hedge fund MFN Partners, which bought a roughly 42% stake in Yellow shortly before it filed for bankruptcy protection.

Shares in Yellow, the entity charged with dissolving the trucker's terminals, equipment and other assets, plunged to below 50 cents a share in premarket trading Monday, from $5 a share late last week before the judge issued his ruling. Shares recovered slightly to reach 74 cents a share in midmorning trading.

Eleven pension funds say they are owed $6.5 billion because Yellow withdrew early from their plans.

Yellow, one of the oldest and biggest U.S. trucking businesses, collapsed in the summer of 2023 in one of the biggest failures ever of an American trucking company.

The former trucker is on target to raise more than $2.5 billion from the sale of its nationwide network of truck terminals as well as tens of thousands of tractors, trailers and other pieces of equipment.

That is enough to repay the roughly $1.2 billion Yellow owed to secured creditors, such as the federal government and investment firm Citadel, as well as the several hundred million dollars needed to cover priority unsecured claims such as former workers' unpaid wages and benefits.

It would also have been enough to pay more than $500 million owed to unsecured creditors, such as Berkshire Hathaway-owned BNSF Railway as well as a string of smaller companies that did business with Yellow. But the judge's ruling will severely dilute funds available for those payouts.

Yellow had argued that the company shouldn't have to pay a withdrawal liability, in part, because the plans received $41.1 billion in federal aid during the Covid pandemic.

Judge Goldblatt rejected those arguments. He also rejected the size of some of the pension claims, which will be determined later.

Write to Paul Berger at paul.berger@wsj.com

(END) Dow Jones Newswires

September 16, 2024 10:44 ET (14:44 GMT)

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