Yellow Corp pays 526M to settle pensions

Yellow Corp., the bankrupt trucking company, has reached a $526 million settlement with four multiemployer pension plans. The agreement resolves a major legal hurdle in its Chapter 11 case. MFN Partners, the company’s largest shareholder, supports the deal, which would end a three-year dispute over withdrawal liability claims that began after the bankruptcy filing in August 2023.

Most of the settlement funds will go to three pension plans: the New York State Teamsters Conference Pension and Retirement Fund, the Western Conference of Teamsters Pension Trust Fund, and the Western Pennsylvania Teamsters and Employers Pension Fund. The New York Teamsters plan is seeking approval for a $300 million claim. The settlement involves four multiemployer pension plans in total.

A federal bankruptcy court in Delaware must approve the deal. Court filings state it would “bring the current multi-year long MEPP litigation in these cases to an end.” Approval would allow the company’s liquidating trust to begin distributing payments to general unsecured creditors, including former employees owed paid time off and sick leave.

As part of the settlement, MFN Partners has agreed to drop its pending appeals and waive certain legal fees. The shareholder had previously purchased some pension claims as a hedge, a strategy that became contentious during the legal battle. Yellow and its backer argued the pension plans were already fully funded after receiving federal bailout money in 2021, meaning the company owed nothing under withdrawal liability rules. They also challenged the calculations used by the pensions and federal regulators.

Related: Coal shipments expected to rise in Q4

The U.S. Supreme Court declined to hear Yellow’s appeal earlier this summer. The June operating report showed the company had $593 million in cash but had already spent $293 million on professional fees and expenses since the bankruptcy began. With few options left, the settlement became the only viable path forward.

The agreement, if approved, would save the estate years of litigation and allow creditors to receive payments sooner. The filing described it as a way to “allow creditors to receive meaningful distributions in a timely manner.”

Yellow’s collapse in 2023 was sudden. The company laid off 3,500 nonunion employees on July 28 of that year. Two days later, 22,000 union workers lost their jobs. The bankruptcy filing followed on August 6, leaving thousands without work and pension funds scrambling to recover losses.

The pension plans involved saw the settlement as a way to remove uncertainty. They had argued that Yellow’s abrupt withdrawal left them underfunded, despite the federal bailout. The dispute focused on whether the company’s exit triggered additional liability and, if so, how much. The final figure represents a significant recovery for the plans.

Related: How free trade deals affect your business

If the court approves the deal, the liquidating trust will begin final distributions. Employee claims for unpaid time off have been classified as priority, meaning those workers would be among the first to receive payments. Other creditors, including suppliers and lenders, would follow in the order set by bankruptcy law.

The case has drawn attention in the trucking industry, where multiemployer pension plans are common. Yellow’s argument—that federal bailout money should have covered its obligations—had resonated with other companies facing similar disputes. The Supreme Court’s refusal to take the case means the settlement may influence how future withdrawal liability claims are handled.

Yet the deal does not address broader questions about pension funding. The 2021 federal bailout aimed to stabilize struggling plans, but disputes over withdrawal liability continue. For now, the agreement provides a resolution for Yellow’s creditors and pensioners, though the underlying issues remain for others in the industry.