đ„What's $32mm Among Friends? Yellow Corporation, Part III.đ„
Plus: NYC Real Estate Distress (540 West 21st Street Holdings LLC)
As you well know by now, on August 6, 2023 and August 7, 2023, less-than-truckload (âLTLâ) shipper Yellow Corporation ($YELL, f/k/a YRC Worldwide Inc) and 23 affiliates (collectively, the âdebtorsâ) filed chapter 11 bankruptcy cases in the District of Delaware (Judge Goldblatt). The debtorsâ filing was meant to kickstart an immediate marketing and sale process of the debtorsâ assets â 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 coverageâŠ
âŠprior to the âfirst dayâ 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 âauction,â of sorts (air quotes), to see who could provide the best DIP terms to the debtors!!
Enter Boston-based MFN Partners (âMFNâ), a fund with a meaningful slug of the debtorsâ 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: youâll 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 hadnât 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 LLPâs Patrick Nash:
â[The debtors] have received a number of inbounds, believe it or not, from other parties who say theyâre prepared to provide the new money on a junior basis, one of whom has retained counsel and weâve been in contact with that partyâs counsel.â
At this point, Pat, we believe it. Whatâs 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 theyâd throw a monkey wrench in Apolloâs plans; as large equity holders, they didnât 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 theyâd 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, couldnât care less whether the debtors decide to go with their proposed DIP financing package or someone elseâs; they, as their counsel, Eric Winston from Quinn Emanuel Urquhart & Sullivan LLP, put it:
â[We w]ant to make sure that whomever is the DIP lender, if itâs MFN or somebody else, that it allows for the estate to have a robust marketing process; doesnât give a leg up to anyone thatâs interested in bidding. And if itâs us, great, if itâs somebody else, thatâs fine. But it should be not only the most efficient economically, but efficient to allow for that robust marketing process.â
In short, âbig timeline good, big proceeds good, MFN want big timeline to get big proceeds.â
