Fri 12/17/2021 08:58 AM
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Relevant Items:
Yellow Corp.’s Covenants Tear Sheet, Debt Documents Summaries
Yellow Corp.’s Debt Documents

Yellow Corp. is a holding company that, through its operating subsidiaries, offers its customers a range of transportation services. Yellow Corp. has “less than a truckload,” or LTL, networks in North America with local, regional, national and international capabilities. Yellow Corp. offers LTL shipments and supply-chain solutions for shipping industrial, commercial and retail goods. The company changed its name from YRC Worldwide Inc. to Yellow Corp. in February 2020.

All of Yellow Corp.’s long-term debt is secured, and it includes a $450 million ABL revolver, a $613 million term loan provided by Apollo and $709 million of CARES Act term loans, provided by the U.S. Treasury and segmented into a $300 million tranche A and a $400 million tranche B. The company does not have any capital markets debt.

The company entered into the UST term loans in July 2020 and amended its Apollo term loan at the same time; under the UST term loans and amended Apollo term loan, the company is in a “covenant adjustment period” until it delivers financial statements showing EBITDA of greater than $200 million for any 12-month period, beginning with the period ending June 30, 2022. During the adjustment period the company is prohibited from using nearly all capacity under its debt, restricted payments, investments and debt prepayment covenants; even after the period ends, capacity will be limited under the negative covenants. Financial maintenance covenants and capacities are discussed in greater detail below.

The company’s capital structure as of Sept. 30 is as follows:

 
Covenant Conclusions

 

  • Liquidity and financial covenants - A $125 million minimum liquidity requirement under the UST term loans and Apollo term loan terminated, as the company achieved EBITDA of greater than $200 million for the last-12-month period ending June 30. In its Sept. 30 10-Q, the company reported liquidity of $409 million, comprising $358 million of cash and cash equivalents and $51 million of “managed accessibility,” which the company describes as the maximum that it would draw under its ABL facility. The reported maximum availability under the ABL facility as of Sept. 30 was approximately $96 million.

    Beginning with the period ending Dec. 31, 2021, the company will be required to comply with a $100 million minimum EBITDA requirement. LTM adjusted EBITDA as of Sept. 30 was $248 million.

  • Other notable items - Under the UST term loans and the Apollo term loan, as of Sept. 30 the only additional secured debt the company may incur is an additional draw on the ABL facility using $51 million of existing availability. The company can incur only $30 million of unsecured or structurally senior debt utilizing a general-purpose debt basket. Under the Apollo term loan, the company may not pay dividends during the covenant adjustment period (or, under the UST term loans, until a year after the UST term loans terminate), nor may it prepay the UST term loan; the company can, however, transfer $25 million to nonguarantor subsidiaries.

    Under the ABL, dividend and prepayment capacities are uncapped, as availability-based payment conditions are currently met. In addition, the ability to make investments under the ABL is currently greater than under the Apollo and UST term loans. However, as discussed above, the company is currently limited by the more restrictive term loans.


--Jeff Brenner
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