Good afternoon, all. This is Judge Goldblatt. We are on the record in In Re, Yellow Corporation,
which is case number 23-11069, as well as the various affiliated cases. We are proceeding
this afternoon by way of Zoom. My preference in terms of Zoom hearings for what it's worth
is that I ask that counsel leave your microphones muted unless you're addressing the court,
that counsel introduce yourself for the record each time you address the court. And finally,
my own preference is if folks would leave their cameras off unless you're either addressing the
court or wish to be recognized. Not that I'm not happy to see everyone, but I do find it helpful
as a way of managing a Zoom proceeding that if folks turn their cameras on when they would like
to be recognized, I can then recognize you. But if you would otherwise leave your cameras off,
that would be helpful. So with that, I'm happy to pass the baton to counsel to the debtor to take
us through the agenda for our hearing this afternoon. Thank you, Your Honor. Ms. Jones.
I'm Laura Davis Jones, Cholesky and Keelan Jones on behalf of Yellow Corporation, the related
debtors. Your Honor, first of all, let me thank you for giving us time. What we know has been an
extremely busy week already for the court, and we truly appreciate that. Your Honor, you should
have before you an amended notice agenda that we filed. It gives, Your Honor, the current status
of matters. Your Honor, also we have submitted to chambers prior to this hearing some black lines
of some of our proposed orders. One of those black lines disclosed and reflect changes that we have
made after numerous conversations with the U.S. trustee. And if I may, Your Honor, I would thank
Ms. Lamy and Mr. Sheppard-Carter, who have spent quite a bit of time with us trying to get through
those orders. And I think if not all done, we were very close to being all done on all those
proposed orders with respect to the U.S. trustee comments. And we thank you for them for that.
Your Honor, personally, I have the pleasure of in co-counsel with Kirkland and Ellis
on this case. And Your Honor, if I may, Mr. Nash has got his video on and I would like to yield to him.
Perfect. Thank you, Ms. Jones. And I have seen those red lines and I appreciate those being
submitted. Mr. Nash, let me pass the baton to you. Good afternoon, Judge. Pat Nash from Kirkland
and Ellis proposed counsel to Yellow Corporation and its affiliate debtors. We're, of course,
here for our first day hearing. I want to echo Ms. Jones' thanks to the court, to chambers,
and to the U.S. trustee's office for all the accommodation leading up to today.
Your Honor, before diving into the agenda, if you'd permit me to, we've had an active few days
since we filed the cases on Sunday night. I want to make Your Honor aware of where things stand with
respect to our debtor in possession financing and also lay out for Your Honor, you know, why we
filed these cases and where we intend to go here. Your Honor, of course, it's common in most
situations for debtors counsel to open up a first day hearing describing in-depth and at length the
circumstances that led to or caused the company to be in Chapter 11. I am not intending to do that
here today, Judge. One of my favorite phrases is people stand where they sit, and it's particularly
true in restructurings. I've found over the years different stakeholders have different
perspectives on a restructuring or a troubled situation. And with respect to the path forward
and what the current state of play and what we hope to accomplish in these cases, with your
permission, Judge, I think I'll focus on that. The current state of play, Your Honor, is that
yellow has ceased all operations. There is no prospect of a going concern reorganization, and
there is no prospect of a going concern sale. And as painful as that is, and painful for the
employees, former employees of yellow first and foremost, they're the ones most impacted by this.
That is the current situation. The fact of the matter is that the week of July 17th, yellow's
shipments fell off a cliff. It was not uncommon, Judge, in the weeks leading up to July 17th
for yellow to have as many as plus or minus 50,000 shipments on any given day.
That shipment count declined precipitously the week of July 17th. And on Friday, July 21st,
Judge, yellow picked up zero or near zero new shipments. So then the week of July 24th, yellow
affirmatively stopped picking up any new shipments and spent that week focusing on flushing the
shipments that it had in the system through the system. And as of July 30th, approximately
28,400 of yellow's, approximately 30,000 employees were let go. And when we think about the
stakeholders in these cases and who is most impacted by the demise of this 100-year business,
it's certainly the employees. And as you'll hear later in my remarks, we have every expectation and
intention of honoring all employee obligations during these cases. We believe we're going to have
proceeds to do that. And we're certainly confident that any of those claims that constitute priority
claims or to the extent they constitute administrative claims, we do not see any issue
with those being paid. And that's been a focus of the company. So where are we going to go from
here, Judge? We are, we filed these cases for the purpose of selling substantially all of yellow's
assets pursuant to section 363, converting yellow's assets to cash and distributing yellow's,
and distributing that cash, pardon me, your honor, to yellow's stakeholders. And when we talk about
yellow's assets, what are we talking about? We've given out approximately 308 service facilities,
169 of those are old, 142 of those are leased. Those are terminals, Judge. We've got approximately
42,000 trailers, approximately 38,400 of those are owned, approximately 7,200 of those are leased.
And we've got approximately 12,700 tractors. That's the truck, you know, Judge, that moves
the trailers. Approximately 11,700 of those are owned and approximately 1,000 of those are leased.
Your honor, with respect to this collateral, earlier this year, the terminals in the rolling
stock were appraised at an approximately $2.1 billion valuation, approximately a billion one
for the real estate, and approximately $900 million for the trailers. Then, as I said,
that is a recent appraisal. Ducera, the company's proposed investment banker,
is already, Judge, in the market, marketing these assets. And I am pleased to be able to report
that as of today's hearing, as of this morning anyway, we could have a few more
now that we're sitting here, you know, just after 3 p.m. in the Eastern time zone. But we've got
93 parties under NDA, including 21 strategics. We have gone out, your honor, of 292 parties,
and only 15 have declined at this point to participate. Approximately 184 are continuing
to evaluate whether to participate. And from our perspective, we are very optimistic that
the sale proceeds are going to exceed the entirety of the better secured capital structure,
including any post-petition financing. You know, Judge, there's been a ton of media coverage around
the yellow situation, and I've read numerous articles where industry experts are describing
this as a once-in-a-lifetime opportunity for interested parties to secure assets such as these
and the volume of these assets. Yellow's terminals are located all over the country. Many of them
are in what are already built up urban areas. So if you are interested in a terminal in a specific
built up urban area, you know, they're not building any more of them. So we do have a lot of optimism
around the sale process. We do not think that there's any prospect of administrative insolvency,
and we're cautiously optimistic that there's going to be material proceeds available for
unsecured creditors, probably premature for me to speculate, you know, how many millions,
how many hundreds of millions, but suffice to say we have a high degree of optimism around
the sale process. And that has been borne out by the work that's been done to date.
Judge, in terms of Yellow's existing capital structure, we've got an ABL facility. We've got
what we call a B2 term loan, and we've got two tranches of funded term loan debt from the United
States Treasury Department. The ABL facility, Your Honor, has a priority lien on cash, accounts
receivable, and deposit accounts. As of the petition date, there was a large amount of
cash. As of the petition date, there was approximately $900,000 drawn on the ABL and
approximately $359 million in undrawn letters of credit. With respect to the B2 term loan, Your
Honor, there was approximately, as of the petition date, $501.5 million owed to the B2 term lenders.
That facility, Your Honor, is secured by a first lien on all of the company's real estate,
as well as a first lien on certain of the company's rolling stock. The U.S. Treasury loan,
Your Honor, it's got two tranches, as I mentioned, what we call the tranche A, and owed under there
is $337 million approximately. And we've also got, Your Honor, the tranche B, U.S. Treasury loan,
and the amount outstanding there is approximately $400 million. And that U.S. Trustee tranche B
loan judge has a priority lien on certain of the company's rolling stock. Also, importantly,
all of these funded debt issuances, all of these secured debt instruments have shared,
all this collateral is shared. So certain of these facilities have a priority senior lien,
but all of them have, you know, crossing junior liens on all of the collateral. Of course,
we do expect that there is going to be a lot of unsecured claims generated here and expect that
there will probably be a lot of work to be done on that denominator. But the unsecured predators
are obviously an important constituent, as they always are, but particularly here, because we do
not think the secured debt is the fulcrum. And then with respect to the equity, Your Honor,
approximately 30 percent of this company's equity is owned by the United States Treasury Department,
and approximately 42 or 43 percent of the equity is owned by MFN Partners LP,
a private investment fund based in Boston, Massachusetts. And you'll hear more about MFN
here in a bit, Your Honor. So we filed these cases, judges, you're aware, because we filed
a motion and whatnot, and filed these cases with dip financing from certain of our B2 lenders.
And the B2 dip facility would provide $142.5 million of new money to the company.
And let me say, Judge, that was a hard-fought negotiation, and we certainly didn't get
everything that we want, but it was a good-faith negotiation. We are very appreciative of the B2
lenders who stepped up and demonstrated a willingness to finance these cases post-petition.
We're clearly better off having committed dip financing. The cases are, they benefit from
having committed dip financing. So we are very appreciative of it. Notwithstanding everything I
just said, Your Honor, there are aspects of that financing that we wish were different and that we
didn't love. First, I'll take through a couple of these, because I think it's relevant to the
overall picture of where we're going and what we're dealing with. The financing that we have in hand
is expensive, but so is probably every dip financing proposal I've ever presented to a court.
The financing is predicated on a day-one roll-up. $142.5 million of new money predicated on $501.5
million getting rolled up at the interim hearing. We resisted that mightily, as Your Honor might
expect. We have questions ourselves as to whether Your Honor would have allowed us to do that.
But in any event, the financing that we filed these cases with requires a day-one roll-up.
The financing that we filed these cases with has a milestone that would
purport to require the bid procedures order to be entered within 10 days of the petition date.
So within 10 days of Sunday, we anticipated that Your Honor might have a problem with that.
And then also, importantly, Judge, the financing that we have in hand is for effectively a 90-day
case. The dip facility matures within 90 days. That's extendable to 105 days with lender consent.
And is 90 days a sufficient amount of time to dispose of all of these assets for more than
the secured debt? We think that it is. But if it was up to the debtors and we had our druthers,
do we think that we would benefit by having a little more time than 90 days? And the answer
to that question is we do. In a perfect world, the interest in these assets is so robust
that maximizing value will in a positive way take longer than 90 days. Also, Your Honor, another
issue that we have with the financing, as much as we appreciate it, it is premised upon and it is
a requirement that the bid procedures be acceptable to the dip lenders. And those bid procedures,
Your Honor, that are acceptable to the lenders, limit the debtors' flexibility in certain ways
that the debtors would prefer to not have their flexibility limited. Most importantly and
specifically, those bid procedures preclude the debtors from selling assets piecemeal. Now,
that's not to say that we have some specific intention of selling assets piecemeal. But if
it were up to the debtors, Your Honor, we would have the freedom and flexibility in our business
judgment to bring assets to market and to sell assets in the way that is most value maximizing,
even if that is piecemeal. And so where does that leave us? Yesterday, Judge, we received a
financing proposal from MFN Park. Oh, before I talk about the MFN Park, I want to talk about
MFN financing, Judge. Let me describe a couple other aspects of the dip financing that we have
in hand. The dip financing that we have in hand, Your Honor, is predicated on the day one roll-up
in the new monies. So that's $644.5 million of dip financing under that proposal. That financing
would be senior and priming on what is the B2 priority collateral, the real estate and those
and that portion of the rolling stock for which they are already priority senior lenders. That
financing would not prime the ABL lenders with respect to the ABL collateral. And that financing
would not prime U.S. Treasury with respect to the U.S. Treasury priority collateral. And that
financing package that we started these cases with, Judge, with respect to the use of cash collateral
by agreement, we have an arrangement with our ABL lenders where 80 percent, 80 cents of each day's
AR receipts would be turned over to the ABL lenders to secure their unground letters of credit.
And 20 cents of every dollar would be available to the debtors to fund these cases. So that's the
financing that we have in hand. Yesterday, Your Honor, we received the financing proposal from
MFN Partners. And what MFN Partners has proposed to the debtors is to effectively step into this same
financing arrangement, provide the company the same $142.5 million of new money. They would be
doing it a little bit cheaper. The interest rates are the same. The fees that would be payable there
under are less than what would be under the dip financing that we have in hand. With one, you know,
important issue or consideration, Your Honor, their $142.5 million of new money, they are proposing
and insisting that it is parried to the existing B2 debt. So their $142.5 million would be parried
to the existing $501.5 million that is owed to the B2 lenders. The B2 lenders, as Your Honor might
expect, you know, are not willing or, you know, not willing to be, I don't know if it's primed,
it's effectively priming. It's priming with respect to approximately 20% of every dollar generated
from their collateral. And they have, no surprise, expressed an unwillingness to be primed in that
fashion. The other aspect of the MFN financing proposal, another important aspect, Judge,
is that they would be proposing a 180-day process. So they would be giving us more time to the extent
that we need it to maximize the sale value of these assets. And also, given that they are the
largest equity owner, Your Honor, we have every expectation that when it comes to, you know, the
process and the strategy and tactics around how to, you know, bring these assets to market and
sell them, we anticipate that the debtors would have certainly more flexibility, you know, if not
total business judgment flexibility with respect to how we market those assets. Because they're
not an existing lender, there's no roll-up component to the MFN financing. And so there's a lot
that is, you know, very positive about the MFN financing. And there's also the challenge, Your
Honor, that they're insisting that they prime the existing B2 lenders at least with respect to
approximately 20 cents of every dollar generated. Your Honor, then this morning we received and
we're at the, we have, there's other, you know, of my colleagues who are, you know, down the hall
negotiating with Estes Express Lines, a strategic participant in the trucking industry. Estes has
indicated, Your Honor, a willingness to effectively provide the same financing that the B-Circuit,
the B2 lenders have already provided and that MFN has indicated that it would be willing to provide.
They have indicated a willingness to step into that same financing structure. I may not have
mentioned, Judge, but I should. The MFN financing, I think I did, you know, they would not be, MFN,
like the existing B2 lenders, would not be priming the ABL lenders with respect to ABL collateral,
would not be priming the U.S. trustee with respect to U.S. trustee priority collateral.
And similarly, Estes is proposing to not prime the ABL lenders or treasury. But importantly,
Your Honor, Estes has indicated a willingness to give the company the money that it needs on a
junior basis also to the existing B2 loan. So they would be, their new money would be next in line
as to the B2 collateral, but would be junior to the other secured parties with respect to their
priority collateral. And we are, you know, feverishly going back and forth with Estes to document that
proposal, reduce it to a term sheet. We do believe that it is real and that it is viable.
One important, another very important detail, the Estes financing, Judge, is, would be, Estes is
prepared to advance the company up to $230 million. The existing proposal that we have and the
MFN proposal is for $142.5 million. Estes is prepared to upsize that facility and one of the
primary, if not the primary motivation for upsizing that facility would be to give the
debtors sufficient proceeds to pay priority and administrative employee obligations,
PTO and otherwise. Without question, Judge, the other secured parties in the case,
notwithstanding that I am preemptively reserving their rights and sure they're going to get up and
also reserve their rights, from the debtors perspective, the fact that we have a DIP lender
who is prepared to loan us money to make sure that the 28,400 already let go employees and the
1,600 employees who are currently working themselves out of a job, to the extent that we've got a party
who is prepared to loan us the money so that we can pay any of those obligations that are admin
and priority claims in a case that we do not see a prospect for administrative insolvency.
We are very pleased to receive that proposal. Obviously, there's no financing in front of your
honor today. There's nothing that anybody needs to reserve their rights.
All right. So Mr. Nash, apologies. You may have told me this already, but in looking at my notes,
I don't have it. So my apologies if I'm asking you to repeat yourself, but the pricing of this
Estes proposal, is that comparable to the other terms in terms of fees and interest?
It's 2%…interest rate is 2% less judged than the other proposals.
And the fees are 4% of the new money. And the fees associated with the MFN financing is 5%
of the new money. And the fee associated with the financing that we have in hand is at least 5% of
the new money, maybe more than 5%. Got it. Okay. And I saw the first
day declaration that described the ability to refinance out the original term. I take it that's
perhaps overtaken by events, but I think I follow that much. Okay. Apologies for the
interruption. Let me let you continue. No, I appreciate it, Judge. Any other
questions? Please stop. So where we find ourselves today, Your Honor, is not comfortable
moving forward seeking approval of a day one roll-up and the financing that we have in hand
as much as we appreciate having it in. We do think that these other two proposals that we've
received are compelling. The Estes proposal, Your Honor, also contemplates up to a 180-day case.
And no one has seen that proposal. And so, obviously, everybody's rights are reserved
as to that proposal. The other parties in the case have at least seen a term sheet with respect to
the MFM proposal. Optimistically, Judge, to the extent that Your Honor would have time for us
later in the week, I know it's already Wednesday afternoon, so there's not that much time left,
and I understand you're very busy this week. But in a perfect world, Judge, if we had a hearing
date from Your Honor sometime on Friday, we would be in a position to get amended debtor in
possession, financing papers on file. And if the Estes financing ends up truly materializing,
as described and as we're discussing with them, which is stepping into the existing structure that
all these pre-petitions secured parties have signed off on, and in fact doing it junior to the
existing be-too-dead, I'm cautiously optimistic that we would have an agreed order for Your
Honor on Friday, or maybe we would be fighting about whether a semicolon should be a comma
or something like that. But we should, optimistically perhaps, but hopefully be in a better position to
have a more fulsome record and a higher level of consensus, folks having had an opportunity
to review this financing and whatnot. I also want to point out for my colleagues who represent
the other pre-petitions secured parties, with respect to the Estes financing, what we're
discussing with them, Judge, is the same $60 million first day draw as contemplated by the
financing that we have on hand. So to the extent that any of the other parties have questions,
concerns, or agita about the upsize amount as 230 is compared to 142.5, none of that is going to be
up if we aren't positioned to have a hearing in front of Your Honor later this week. The balance
of that financing is going to be kicked over to a final hearing, it's going to be kicked over to
after a committee is formed. You know, these other two financings, Judge, whether it's MFM or Estes,
they contemplate us getting bid procedures on file only after a committee is formed, and only
after a committee has an opportunity to weigh in. And you know, Judge, a case like this where we've
got like a billion, multi-billion dollars of assets, and the entire case revolves around selling
those assets, we frankly think it's pretty important that the official committee, when it gets formed,
have an opportunity to weigh in on those procedures. And so apologies for, you know, we're not all that
settled right now, but the fact of the matter is, is that the developments from our perspective,
since we filed the cases, have been positive. Okay, so Mr. Nash, so thank you for that. That's
very helpful. Let me say the following. I mean, first of all, it's always cheering to see
competition over, over DIP financing. I understand that we are available at 10 o'clock on Friday,
to the extent you want to come back with a DIP loan then. What I'm going to say that is going
to be less helpful to all of you is the following. If what we have on Friday is essentially in agreed
order or a conversation about wording, I'm happy to do it by Zoom. If we've got a priming fight
where I've got to hear evidence about value in order to make appropriate findings, but adequate
protection or the like, I do want to do that in person. So I don't know, and I appreciate that you
may not know the answer to that and that it's complex. You've got to make decisions about travel
and I appreciate that that's not perfect, but I think it's frankly better than the risk that I
have to conduct a hearing where I've got to make findings on a contested factual question of
valuation or adequate protection based on a Zoom record. So again, if you're able to get to a
non-evidentiary hearing, I'm happy to do that by Zoom under the circumstances. But if we're going
to have a contested hearing on Friday, I'd like to do that in person. Is that clear enough?
– Clear and totally understandable, and frankly, I anticipate it as much. Thank you, Judge.
– Great.
– And thank you for me. And thank you. What we appreciate first and foremost is
the time at 10 a.m. on Friday. So thank you. – Terrific.
– Your Honor, in terms of before, one thing I neglected to mention that with us in the virtual
courtroom is the debtor's first day declarant, Matt Doheny, the chief restructuring officer of
Yellow Corporation. And at some point here, you know, we'll move his declaration into evidence
to provide the evidentiary basis for the first day relief that we are going forward with here today.
Also, Judge, we do anticipate after we get through the agenda at the end of the hearing,
very helpfully, and again, appreciate, my colleagues and the counsel to the ADL lenders
are working on a consensual cash collateral order to bridge us, I believe, through Monday of next
week, you know, Friday, hopefully in a position to get debt financing approved. We do have a payroll
that would come due tomorrow. We have another payroll that would come due on Friday. And,
you know, a few other limited and discreet items that, again, with thanks and appreciation,
we do believe that we're going to have consensus around using cash collateral coming out of today's
hearing and didn't want to neglect to mention that. We'll deal with that, Your Honor, because
that order is being worked on. We'll deal with that. It's okay with you, Judge, at the end of the hearing.
MR KIRBY And that makes good sense, Mr. Nash.
MR NACHT Okay. And with that, Your Honor, I will move Mr. Doheny's declaration into evidence – or
should I wait until other – I see other folks may want to be heard.
MR KIRBY Let me see if others want a chance to be heard. So I think the order is
Mr. Dunn, then Mr. Hsu, and then Mr. Winston. So Mr. Dunn. And then Mr. Nelson.
MR NELSON Thank you. For the record, Dennis Dunn,
the Null Bank, LLP on behalf of certain investment funds and accounts managed by
affiliates of Apollo Capital Management. With the court's indulgence, I just wanted to spend a few
minutes kind of sharing the perspective of our client company, its recent history, and the matters
before the court today. It'll – it will allow me to provide perspective on the dip, which isn't
going forward today, and also will allow me not to interject repeatedly as we consider the individual
motions. And I don't think I'll take more than five minutes or so. So with the court's permission,
I would report to do that.
MR KIRBY Okay. You can proceed.
MR NELSON Thank you. Apollo owns a majority of the V2 term
loan, which Mr. Nash described accurately earlier. Approximately $500 million is due as of the
petition date, and the loan is secured by a first lien on the terminals and other assets,
and a second lien on the cash and certain ADL collateral. This case, Your Honor, has really
been an extraordinary one and surprising in many respects. You know, at the highest level,
that – you know, such a kind of story franchise in the critical industry is filing Chapter 11 to
immediately liquidate is extraordinary in and of itself. In my career, it has been extremely rare
to be involved with a business that starts its Bank 50 case having ceased operations,
and so we don't liquidate and monetize its assets and run it the absolute priority waterfall.
I think we've all been involved in cases that ultimately decided to liquidate after using
Chapter 11 for some period of time to attempt to reorganize or sell itself through the dollar
concern. And this company just at the end of last year, the company was doing $5 billion in
revenue, I believe, and over $3 billion in EBITDA, and they went from there to shutting down and
liquidating. How we arrived here and the decisions made by the company over those quarters in reaction
to the conduct of the unions and otherwise will no doubt be hotly debated and contested, but that's
not – for me, we're not going to wade into that thicket today. But what is relevant today and on
Friday, Your Honor, is that once the company made this decision to liquidate pre-petition and wind
damage operations, Apollo and the other lenders immediately sprung into actually about to work
with them. We engaged with the debtors to better understand their preferred path forward, relevant
cost and timing, and potential impact on our collateral. And these interactions demonstrated
that this, again, is an unusual case because the contemplated process in order to maximize the
value would require more liquidity than the company could access through the use of cash collateral
alone. So it became pretty clear early on that there was an additional funding need. And we worked
tirelessly with the company to kind of size that dip financing amount that would offer the debtors
the necessary liquidity, but that was predicated on a heavily negotiated, carefully calibrated budget
to ensure that both the assets were sold thoughtfully and on a reasonable and appropriate
timeline. But here we are today actually not moving forward with that dip facility because
the debtors have received at least one, maybe two, uncommitted dip proposals, and they want to hit
the pause button to explore them, one of which is on a carried-to-sue basis with our means.
Again, I'd say this is unusual, at least in my career. There have certainly been cases where the
debtors have paused to receiving kind of committed facility and commitment letters that were
materially better or that took out the incumbent lenders. The MFN one is on a junior basis,
and the other one I haven't seen any terms of yet. But it's a decision that, while it's a prize to
us, it basically just has us concerned and a bit fatigued. And you only have to look at that recent
history to understand why. A few long ago, we were loaning to a company that had $5 billion in
revenue and hundreds of millions in EBITDA. But then the company, for whatever reason,
began to fail to execute on the plan of integration of their various business lines, and the business,
as Mr. Nash said a few minutes ago, kind of fell off a cliff. And the debtors found themselves with
no choice but to cease operations and to liquidate, and tens of thousands of jobs, Your Honor, have
been lost. And Apollo, together with the other pre-petition B2 lenders, were prepared to provide
dip financing to fund a controlled and we thought thoughtful sale process in Chapter 11, based on
the debtors' belief that a controlled wind down over that top line would yield the best results.
The debtors are now pivoting away from that in the hope that something better comes along.
But it's those decisions, Your Honor, or indecisions that make us continue to be concerned
about the trajectory of the cases and the value of our collateral. We hope that this doesn't need
to additional delay and degradation. We're really just looking to protect our collateral and receive
payment on the claim. Your Honor, a couple of points about the dip, and this is all kind of
real time that I wanted to raise, because this will be important as your others speak. One knock-on
consequence to the debtors' decision yesterday to not move forward with our dip today is it deprived
us of the usual time, the usual interactions to refine and finalize our dip terms. What do I mean
by that? And I know Your Honor knows this, both from your time on the bench and during private
practice, but in that period between filing and the first day hearing, the dip ledgers field
numerous emails from the U.S. trustee and other parties with respect to prospective objections to
the dip and proposals to resolve those objections. That's exactly where we were 24, 36 hours ago.
And as a result of those interactions, economic or other changes are often made before the hearing.
Indeed, I frequently rise at the beginning of these hearings to say, good news, Your Honor,
we've revised the dip in the following ways to address or resolve most, if not all, the concerns
of the U.S. trustee or others. The point I want to emphasize here is that that annealing process
on our dip didn't happen. And so any summaries you hear of the dip, you should take with that
caveat in mind. Plus, we haven't had the benefit of Your Honor's thinking on it either. Your Honor,
with respect to the collateral, just two points, one of the dip lenders, the one that precipitated
the German MFN, their dip is coming in parric. That always concerns us because that means not
withstanding Mr. Natchez's contention that they believe we are extremely over-secured, the dip
lenders unwilling to underwrite that proposition, they don't want the junior to us. And if we ever
get to a contested hearing, you'll see the appraisals that were done in very different
circumstances and under very different assumptions with respect to misuse and going concern assumptions.
One other note, this more disclosure point about one of the perspective dip lenders, MFN, which I
think Mr. Natch mentioned is either a large or the largest stockholder of the debtors. I saw today
that it's been publicly reported they're also the largest stockholders of XPO, a strategic competitor,
and I think somebody who is under NDA now and potentially a prospective bidder. So the alternative
dip lender has a significant economic interest in one of those bidders. The court just needs to be
aware from the outset of any potential economic influences there. A couple other points and then
I'll yield, Your Honor. The time factor, the debtors tout the fact that the sale milestone might be
as far out as 180 days under the alternative dip proposals. I want to make two points there, one of
which is more time is not always better, Your Honor. For one thing, lawyers, and I mean this with all
due respect, they're like inert gases, Your Honor, they expand to fill up the allotted space. An extra
three months guarantees additional fee bird and administrative expense bird, but with no concomitant
guarantee of higher sale prices. We spent a lot of time with the debtors reviewing their pre-petition
efforts to attract interest in their assets, the current number of parties under NDA, how much time
those parties would likely need to transact, among other inputs. The debtors and we concluded that 90
days was an appropriate milestone for that sale. It was longer frankly than we thought was necessary
and we deployed under other liquidations, but we exceeded to the debtors request there. One telling
point though, Your Honor, is the debtors never pushed us for a 180-day sale milestone. The
debtors first request before this refinement process I just mentioned concluded sort of 105
day milestone, 105 not 180. So the much talented milestone provides substantially more time and
corresponding risk of drift than the debtors sought with us in terms of milestones. The roll-up,
you know, if we're back in front of Your Honor, we'll talk about it slightly more than three to one,
we don't believe it's off market, but here if the debtors are right, we're over secured and it hurts
no one. On the junior facility, we haven't seen anything in writing about it. Obviously a junior
facility is better. We'll review it if and when it materializes, but right now it's an expression
of interest. If it is materially better and truly junior and doesn't hurt us from a credit bidding
remedial or other standpoint, we'll work with the debtors on terms and adequate protection and
timeline, but we'll see how that plays out between now and Friday. My last point, Your Honor, and I
apologize because it's unfortunately a technical one, is adequate protection. We, as is common,
requested adequate protection prior to the filing in connection with our negotiation of the dip
and a corresponding adequate protection package acceptable to us and the debtors. Had we moved
forward with the dip today, we'd be seeking the Court's approval of that adequate protection
package and its terms. The debtors, as you've heard, have decided to adjourn today's dip hearing.
There are two potential paths forward. One path, when we're next in front of the Court, maybe we're
moving forward with our dip and adequate protection in any event, in which case Your Honor will judge
the propriety of that package and it will rise or fall on its own. The other path is the reason I
raised this now. It's possible, although I hope unlikely, that the debtors don't move for approval
of a consensual adequate protection dip with us and we have to fight for it. In that case, we need
to be clear on one item and it is why I'm putting it on the record now. We requested adequate
protection for the petition. We requested it already and to the extent we have to formally seek
it in the future because the debtors decide not to prosecute the stipulation we have with them,
we seek adequate protection from the petition date forward. It's from the petition date that
we made our request and at all times have made our request for adequate protection from the petition
date. I don't think I can say it more clearly than that. Your Honor will have a lot more to say about
the alternative dip facilities on Friday, but let's leave it for then and unless Your Honor has any
questions to me, I'll yield the virtual podium and I appreciate the time. Okay, thank you. Thank you,
Mr. Dunn. Look, I think everyone appreciates the circumstances of this case are sort of
challenging and unfortunate though. I guess we're all used to taking the case as we find it, so that
sort of is what it is and as unfortunate as it is, of course. But I take it, Mr. Dunn, you're not
taking issue with the debtor to the extent the debtor can finance its way to a subsequent hearing
using cash collateral that isn't your collateral. You aren't taking issue with their decision to
allow a competitive process to play itself out and we'll see where we are.
Your Honor, short answer is yes. The longer one is that we have a second on the cash, but the
ABO controls the consent to use the cash collateral. Got it. Okay. Okay. So thank you, Mr. Dunn. So,
Mr. Su, I think you are next, so let me give you a chance to be heard.
Good afternoon, Your Honor. This is Yiheng Xu from the DOJ on behalf of the United States Treasury.
We thank you for your time and we appreciate the difficult circumstances in front of you today.
The Treasury extended a $700 million loan to the company during the pandemic, and we are focused
on protecting the taxpayers' interests on behalf of the Treasury in this bankruptcy.
Along with Treasury's outside counsel, Arnold Porter, and other advisors, we have worked closely
with the company and other stakeholders leading up to the bankruptcy and negotiated certain
protections for Treasury. There are many moving pieces now, but we understand and we expect Mr.
Nash to confirm later on the record that the advocate protection we have negotiated for
Treasury will still be implemented, regardless of which dip financing is ultimately selected.
And Treasury and everyone on our side, we will continue to work throughout this bankruptcy
to protect the taxpayers' interests. Thank you, Your Honor.
Thank you. Okay, I confess I may have lost track, but Mr. Winston, I think perhaps you're next.
Yes, Your Honor. Thank you so much. Eric Winston of Quinn Emmanuel,
for Cardin Sullivan, on behalf of MFN Partners LP. As Mr. Nash described, MFN holds approximately
42.5% of the common stock of yellow, and we believe it is the biggest stockholder.
We were prepared to object to the dip motion, and we did provide a superior alternative proposal.
One aspect of it that Mr. Nash, I can't remember if he talked about it or not,
but by eliminating the roll-up, that actually ends up saving the estates at least 32 million,
maybe as high as $41 million in fees that would otherwise have incurred on that roll-up amount.
So to the extent that Mr. Dunn is worried about fee burn, that's a massive savings
instantaneously. And we've been pleased and appreciative that the debtors and the professionals
in the last 24 hours have taken our proposal under very serious consideration. And it appears,
whether it be MFN or SDS or really anybody else, there is going to be a better financing. And from
MFN's perspective, whatever is the best one for the estates is the best one that should be picked.
It does not have to be MFN. MFN just wants the estates to have the best economic terms and the
ability to maximize value for all stakeholders and not to be handcuffed, especially with respect to
timing and the flexibility to market assets in the most intelligent way. That seems to be where the
alternative financing is headed, better economic terms and importantly, longer time to conduct a
robust marketing process that benefits all. MFN, with its advisors, has the largest shareholder
and perhaps the dip lender, does expect to be heavily involved in developing and monitoring the
bidding process. I look forward to working with the debtors, U.S. Treasury, which itself is the
second largest shareholder in the company, lenders, and a committee is formed, a committee to achieve
this goal. I do want to just make one comment because I heard something that Mr. Dunn said about
MFN. It is an investor in, I guess, competitor, a completely passive investor, and that company does
what it does with no input from MFN. I wouldn't be surprised if a lot of the folks that are
representing lenders and other constituents would be surprised they are also involved in competitors
or anybody else that may have interest in this, and I'm sure some of you are interested in this.
And I'm sure that we can get through this, whether MFN is the dip lender or not, it is
not going to be an issue. But I just wanted to respond to that point. Your Honor, with that,
I'm – thanks for the time, and we look forward to going forward on Friday, whether it's MFN,
SDS, or somebody else.
Okay. Very well. Thank you, Mr. Winston. Appreciate it. Mr. Nelson?
Your Honor, good afternoon. Philip Nelson on behalf of Altered Dumbness Products Corporation,
which is the administrative and collateral agent for the B2 loans, the B2 agent. I wanted to just
raise or address a technical point that Mr. Dunn brought up at the end of his remarks, which is,
obviously, he and his firm represent Apollo as the majority of the largest lender for our loans,
but to the extent that it needed to be clarified, I wanted to make clear that the collateral agent
joins in that adequate protection request with respect to the entire facility and all of these
secured parties under the B2 facility.
Okay. Thank you, Mr. Nelson. Thank you, Your Honor. Thank you. Mr. Silverman, I think you might
be next, though. If I'm wrong, I apologize to whomever I've allowed you to skip.
Well, thank you, Your Honor. Can you hear me well?
I can.
Thank you. Your Honor, Ronald Silverman, Hogan Loves Plus LLP. We represent the Bank of New York
Mellon as the administrative agent and the collateral agent with respect to both the Tronch
A USD credit facility and the Tronch B USD credit facility. So the United States Treasury is the
lender under each of those, but similar to Mr. Nelson, his role as collateral agent, administrative
agent, we likewise have a similar role. And we wanted to say again, importantly for the first day,
that we reserve our rights generally with respect to the DIPP financing. Secondly, that we understand
and understand that the debtors will be stating on the record that the adequate protection
arrangements that have been negotiated with respect to the US Treasury facilities will be
will be implemented regardless of which DIPP facility is put in place. That does
seem like the case based on the statements that the other DIPP lenders are willing to step
generally into those terms. And lastly, as Mr. Nelson said, as client, we do request and have
requested and seek adequate protection from the petition date. So thank you very much, Your Honor.
Thank you, Mr. Silverman. Mr. Griezmann.
Thank you, Your Honor. Can you hear me?
I can.
Great. Scott Griezmann, White and Case for Beal Bank. Beal Bank is a 45 percent holder of the B2 loan
and echoes all of Mr. Dunn's statements and is in agreement with Apollo that the situation
leading up to the filing and presently is actually quite problematic. I won't repeat all of Mr.
Dunn's statements, but I will emphasize a couple of points. One, there are presently no buyers for
these assets. Two, the appraisals Mr. Nash mentioned are months old and it is unclear if
they were predicated on a going concern or go dark basis. But non-operating terminals and
non-operating rolling stock are obviously much less valuable potentially. And going into an
extended sale process beyond 90 days takes us into seasonal issues that require a much greater
expenditure of the state resources to preserve that collateral. And so in addition, I understand
Mr. Winston's point that the roll-up costs a bunch in respect of additional interest. The additional
90 days also costs a bunch in respect of additional interest and also does take into account the
substantial state expenditures that are likely to be required to preserve this collateral.
Beal Bank won't agree to a priming or parry-pessu dip facility. I think everyone understands that
and Apollo agrees with that as well. And if there is a junior facility proposed, obviously the devil
is going to be in the details. It's not just a junior lien in priority that would be concerning
but also the rights of enforcement and other inter-creditor discussions that can actually
get very complicated in these scenarios. It's hard to understand how all this is going to get
pulled together by Friday. But I won't, I guess, begrudge Kirkland the opportunity to try. But the
situation is a lot less rosy and a lot more problematic than their explaining at the moment.
And we are very concerned about the collateral coverage here and we will be watching this very
carefully. Thank you. Okay. Thank you, Mr. Griezmann. So I see someone who else has your
camera on who's identified as conference room 35C. Apologies for describing you that way,
but if you'd like to be heard, let me give you the opportunity. Thank you, Ron. My apologies for not
having the technological skills to change my name. This is Kevin Samar and Chodolpil Stewart.
We are counsel to the Citizen Bank as the ADL agent. As Mr. Nash stated, all parties' rights
are reserved. We appreciate that they're in the other party working real time with us,
keeping us up to speed. But until we see final terms, we'll need to reserve our rights.
One thing I'd like to point out is that while the proposed SEAS dip is not priming the B2s,
it is priming us on our ABL priority collateral. As Mr. Nash stated, the ABL lenders have a second
on the B2 priority collateral and a third on the U.N. trustee US Treasury priority collateral.
So in fact, that dip would be priming us on those assets. So we have our rights with respect to
ethical protection, our rights with respect to consent. We have concerns with additional dollars
in addition to the $142.5 million being funded. We also have concerns with respect to the extended
milestones. While a little bit more time may benefit the debtor, doubling the milestones
we've asked for, but we've not seen the justification and the cost-benefit analysis
on those points. As Mr. Nash stated, we have worked with the debtor today to come to a
– moving things to a conceptual use of cash – the ABL priority cash collateral so we can bridge
the debtor to pay payroll and a couple other necessary items through Wednesday of next week,
if necessary. Thank you, Your Honor.
MR. RADDATZ Thank you very much. So, Mr. Nash, I think back to you to continue through the agenda
unless there are – I take it no one else would like to be heard more broadly. Seeing no one,
Mr. Nash, let me pass the baton back to you.
MR. NASH Thank you, Judge. Let me make the statement on the record that Treasury is looking for.
We absolutely intend that we are going to respect the existing cash collateral arrangement and
stipulation with Treasury. The financing that we came to court with, Your Honor, was very carefully
and painstakingly crafted. And in terms of our discussions with the potential alternative
debt financing providers, we have made it very clear that from our perspective, they need to
step into – or in the case of SDs, in fact, be better than, because it would be junior to – but
step into the same exact financing and collateral arrangements that the B-2 lenders had reached with
the other pre-petition secured parties. And we have every expectation that, to the extent that
we're presenting alternative debt financing to Your Honor, we are going to be respecting
those inter-creditor arrangements that are already in place.
I also would like to just make clear, Judge, we unsolicited received two proposals that offered
180 days. We may not need 180 days. We didn't ask for 180 days. We do think that having more
than 90 days could be helpful. And just so Your Honor doesn't think that, you know, I fell off
the turnip truck yesterday, $142.5 million is contemplated by the MFN financing, and $230 million
is contemplated by the SDIS financing. If you want to think about, you know, 80 or 90 of that
being sort of earmarked for employees, $142.5 million is not enough to get us to 180 days
if you're not making any assumptions around asset sales. As we've been discussing with both of these
providers, to the extent that we don't sell an asset between now and the 90th day, $142 million
isn't going to be enough money. But to the extent that we're selling assets and generating cash,
$142 million may be enough money. And it may be enough money for a case that ultimately takes
112 days or 118 days or 121 days. We were offered 180 days, and we're discussing the financing,
and we're going to be discussing it with the other pre-petitioned secured parties.
And with respect to Mr. Dunn's comments on medical protection, I'd be shocked, Your Honor,
to the extent that we've got alternative financing of the type and nature that we've been describing,
particularly as it relates to Astes. I'd be shocked if we don't have a consensual adequate
protection package. I want to reiterate, because of course, you could perhaps draw a different
conclusion, but the debtor's to mean it when we say how much we appreciate the financing that we
have in hand, how much better it is to have that financing in hand. We do think it's positive
development, that there's competition. And so with that, Judge, I think we can probably move
into the agenda. And before doing so, with Your Honor's permission, I would move Mr. Doheny's
declaration into evidence for purposes of the relief that we seek here today.
MR PALLADINO Okay. Is there any party in interest that objects to the introduction of Mr. Doheny's
declaration, which I believe is DI 14, admitted, as Mr. Nash says, for the purposes of the relief
sought today?
Okay. Seeing no one, it will be admitted. Is there any party that wishes to cross-examine
Mr. Doheny with respect to the matters before the Court today? Okay. Seeing no one, Mr. Nash,
you can continue.
MR Your Honor, with your permission, I'm going to yield the podium to my colleague,
Connor McNamara.
MR PALLADINO Okay. Very well. Thank you.
MR Thanks a lot, Judge.
MR
McNAVARRA Good afternoon, Your Honor. Connor McNamara, Kirk Lennon-Alice, proposed counsel
3, motion request that the court jointly administer the Chapter 11 cases for procedural purposes only,
and for administrative efficiency. No party has objected to the motion, and unless Your
Honor has any questions, we would respectfully request entry of the order.
MR PALLADINO Okay. Is there any party in interest that would like the opportunity to be heard
with respect to the debtor's motion for joint administration? Okay. Seeing none, I've reviewed
the motion in order. I'm satisfied the relief sought is appropriate, and we will enter that
order.
MR
PALLADINO Okay. Thank you.
MR PALLADINO Is there any party in interest that would like the chance to be heard with
respect to the NOL motion? Okay. Seeing none, I've – I'm sorry, Mr. Mintz.
MR MINTZ Good afternoon, Your Honor. On behalf of Treasury, we did provide comments to that order
that was incorporated. We have not seen the comments and the changes that were made with respect to the
comments received from the U.S. trustee. We would just ask for the opportunity to see those. I don't
anticipate an issue, but it's just something we would not provide.
MR PALLADINO Okay. So, Mr. McNer, under the circumstances,
does it make sense to give you the chance to be sure that you've run those by Mr. Mintz before
they are – I don't know if they've been uploaded, but if you could run those by Mr. Mintz and let
chambers know that those – that there aren't issues that require further consideration? Ms. Jones?
MS JONES Thank you, Your Honor. Your Honor, I would note to the record that none of the orders
have been uploaded. We anticipated that Your Honor may have some comments, so we thought we'd wait
to the balance – until the hearing is over. So in that regard, Your Honor, yes, we can provide a copy
to Mr. Mintz in the interim while Mr. McNer is talking.
MR PALLADINO Okay. Terrific. So I'll take – if they're uploaded, I'll take that as a representation
that those – that there aren't further issues. Is there any other party in interest that would
like the opportunity to be heard with respect to the NOL motion? Okay. Seeing no one, I've
reviewed the motion and the proposed order. I did have the chance to review the red lines that have
been submitted, reflecting, as I understand it, the discussions with the U.S. Trustee.
I'm satisfied that the relief sought is appropriate under the circumstances, and we will,
when it's uploaded, enter that order, which is, of course, on an interim basis.
MR PALLADINO That's right. Thank you, Your Honor. The next motion is the wages motion filed at
Dock at number 20. Under the wages motion, the debtor seeks to pay pre-petition wages, salaries,
and other compensation and continue certain employee benefits programs. In the ordinary
course, for employees employed by the debtors on a go-forward basis and also payable for former
employees who were terminated before the petition date. Currently, the debtors employ approximately
1,600 employees on a go-forward basis. It will be critical to implementing the sale process
in these Chapter 11 cases, as they have historical knowledge of the debtor's assets and operations.
By the interim order, the debtors are only seeking authority to pay approximately $17 million
in wages and employee benefits. The debtors are not seeking to pay anyone over the statutory caps,
nor are the debtors seeking to pay any severance during the interim period. As with the other
orders, we've provided the U.S. trustee and also the secured lenders an opportunity to comment on
the form of order. Those comments are largely incorporated. I don't believe any party has
objected, and unless, Your Honor, there's any questions, we would request entry of the revised
order submitted to chambers.
MR PALLADINO Okay. Is there any party in interest that would like the opportunity to be heard with
respect to the debtor's wages motion? Mr. Mintz.
MR MINTZ Same request, Your Honor, and I would ask for the opportunity to – I won't keep rising,
but with respect to the orders – I know things were moving very quickly, so I understand the
dynamic, but we would appreciate the opportunity to see the revisions that are being made.
MR PALLADINO All right. We'll treat that as a standing understanding that nothing will be
uploaded unless and until you've had the chance to look at it.
MR MINTZ Thank you.
MR PALLADINO Any other party in interest would like the opportunity to be heard with respect to
the wages motion? Okay. I've reviewed that motion and order. I'm satisfied that the relief
sought is appropriate, and we will enter that order again on interim basis when it's uploaded.
MR PALLADINO Great. Thank you, Your Honor. The next motion I will take is the creditor
matrix motion filed at docket number seven. By this motion, the debtor received relief to file
a consolidated creditor matrix, consolidate the top 30 creditors list, and to redact certain
personally identifiable information of the debtor's creditors that are natural persons.
In addition, the debtor's request authority to serve creditors by email that have a valid email
address on file but no physical address information on file. We provided the U.S. Trustee with an
opportunity to comment on the form of order. Those comments are largely incorporated. I do believe
we missed one, and so as with the others, we will submit a revised order after the hearing
for Your Honor's consideration. MR MINTZ Okay. Is there any party in
interest that would like the opportunity to be heard with respect to the creditor matrix motion
and related relief? Okay. Seeing no one, I've reviewed that motion in order. I'm satisfied
that that relief is appropriate, and we'll enter that interim order after it is uploaded.
MR PALLADINO Great. Thank you, Your Honor. The last item I will take you through today is the
insurance insurity motion filed at docket number six. Debtors seek relief to continue their
insurance policies and insurity bonds. In the ordinary course, there are approximately 82
insurance policies and over $150 million in insurity bonds collateralized by over $80 million in
letters of credit. On an interim basis, however, the debtors are only seeking to pay approximately
$3 million, and that is largely related to the premium financing agreements until we are back
in front of Your Honor on Friday or early next week. The proposed order incorporates comments
from Old Republic Insurance Company, comments from Chubb Insurance, comments from the U.S.
Trustee, as well as comments from other parties in interest. I don't believe there are any
objections, so unless Your Honor has any questions, we request entry of the revised order submitted
to the chambers as well. MR PALLADINO Okay. Is there any party in interest that would like
the opportunity to be heard with respect to the debtors' insurance and insurity motion at DI6?
Okay. Seeing none, I have had a chance to look at that motion in order. I'm satisfied the relief
sought is appropriate, and we will enter that order on an interim basis.
MR MCNARRO Thank you, Your Honor. With that, I will turn over the podium to my colleague,
Mr. Jacobson, to tell you through the balance of motion for today's hearing.
MR MCNARRO Perfect. Thank you, Mr. McNarro. Mr. Jacobson.
MR Jacobson Good afternoon, Your Honor. Rob Jacobson of
Perkland & Ellis on behalf of the debtors. I'm going to walk through the balance of today's
agenda as my colleague, Connor McNamara, just alluded to. The next item on today's agenda
at docket number 11 is the debtors' 156C application to retain Epic as our claims and
noticing agent. As a preliminary matter, attached to this exhibit B to the application is the
declaration of Kate Mayhew, Senior Director at Epic, in support of the application. Ms. Mayhew
is on the Zoom line today, and I'd ask to move her declaration into evidence for purposes of
this application subject to parties' rights to ask her questions if they would like to.
MR MCNARRO Okay. Is there any party in interest that would like to be heard with respect to
Mr. Jacobson's motion to move into evidence the declaration of Ms. Mayhew?
Okay. Seeing none, that will be admitted. Is there any party in interest who wishes to cross-examine
Ms. Mayhew? Okay. Seeing none, Mr. Jacobson, you can proceed.
MR Jacobson Thank you, Your Honor. By appointing Epic as
the claims and noticing agent in these Chapter 11 cases, distribution of notices and processing
of claims will be expedited, and the clerk's office will be relieved of the administrative
burden of processing the proofs of claim. Consistent with the claims agent protocol,
we solicited multiple claims agent bids, and we found that Epic's proposal was competitive
and the best fit for the debtors. We've reviewed this motion with the lenders in the U.S. Trustee's
office. No party is objected to this application, and so unless Your Honor has any questions,
we respectfully request entering the proposed order.
MR MCNARRO Thank you. I have reviewed that motion and order.
I'm satisfied that that relief sought is appropriate, and we will enter that order.
MR Jacobson Thank you, Your Honor.
The next item on today's agenda at Docket Number 9 is the debtor's motion to authorize
Yellow Corporation to act as foreign representative on behalf of the debtor's estates in legal
proceedings in Ontario's Superior Court of Justice in Toronto, Ontario, Canada, pursuant to the
Company's Creditors' Arrangement Act. Your Honor, Yellow Corporation is the ultimate parent entity
of the debtors. Yellow Corporation is commencing ancillary proceedings in Canada to request that
the Canadian court recognize the Chapter 11 case of Yellow Corporation as a foreign main proceeding
under the applicable provisions of the CCAA. To that end, the debtors require authority for Yellow
Corporation to act as foreign representative on behalf of the debtor's estates. Recognition of
its Chapter 11 case is necessary to protect Yellow's assets in Canada and to obtain a Canadian
order staying self-help remedies by stakeholders. The lenders in the United States Trustee's Office
have had the opportunity to review the form of order, and no party is objected to this motion.
Unless Your Honor has any questions, we respectfully request entering the proposed order.
Is there any party in interest that would like the opportunity to be heard with respect to the
debtor's motion for an order that would authorize the debtor to act as foreign representative under
Section 1505? Okay, seeing none, I've reviewed that motion and order. I'm satisfied that that
relief is appropriate under the circumstances, and we will enter that order. Thank you, Your Honor.
The next item on today's agenda at Docket Number 10 is the debtor's cash management motion. By this
motion, the debtors are seeking authority to continue to operate their cash management system
and maintain their existing bank accounts, honor certain pre-petition and post-petition obligations
related thereto, maintain existing business forms, and continue to perform inter-company transactions.
Your Honor, Yellow's cash management system is complex and comprehensive. The cash management
system is made up of two silos. There's the USA cash management system, which consists of 30 bank
accounts, and the Canada cash management system, which consists of 14 bank accounts. Because access
to the cash management system is imperative to meet the immediate term obligations, any disruption
to the cash management system could have an immediate and significant value-destructive
effect on the debtor's estates, which would be to the detriment of all stakeholders.
Accordingly, the debtors submit that the relief sought in the motion is necessary and appropriate
under the circumstances. Prior to filing the motion, we received and incorporated comments
from the lenders and the U.S. Trustee's office, and after we filed the motion, but prior to submitting
the revised order earlier today, we received and incorporated informal comments from JPMorgan Chase
relating to the merchant services relationship between Chase and the debtors.
No party is objected to this motion, and so unless Your Honor has any questions,
we respectfully request entry of the proposal.
Okay. Thank you. Ms. Leeming.
Good afternoon, Your Honor. Jay Leeming for the U.S. Trustee. We're resolved on the form of order.
The U.S. Trustee would like to be heard on a motion and in particular Section 345 compliance.
Section 345 of the Bankruptcy Code obligates the debtors in possession to inquire from an entity
with which the estate monies are invested, one, a bond having features defined in Code Section 345B
or alternatively, two, that a deposit of securities consistent with 31 USC Section 93-03,
unless the court orders otherwise. In connection with the cash management motion,
we would make four observations. First, Section 345 places an obligation on a debtor in possession
to require protection for its money from the state.
Second, while Section 345 does not mention the U.S. Trustee's office, the U.S. Trustee's office
in its supervisory role assists with protection of debtor in possession funds by entry into uniform
depository agreements or UDAs. UDAs obligate depositories to maintain collateral for bankruptcy
funds on deposit in an amount no less than $150,000.
UDAs obligate depositories to maintain collateral for bankruptcy funds on deposit in an amount no less than 115%
of debtor in possession in trustee deposits, which exceed FDIC limits.
The U.S. Trustee maintains information on the banks who have executed UDAs,
and there is a current list posted on our website of those banks.
Third, in order for a debtor in possession to comply with Section 345 where a UDA bank is involved,
the debtor in possession must first identify and disclose all accounts where monies are held,
and second, contact those banks to ensure the relevant accounts are designated as debtor in
possession accounts. Fourth, recent bank failures highlight the importance of the debtor in
possession's compliance with Section 345 for the benefit of all of its stakeholders.
The U.S. Trustee seeks specific language in any interim cash management order that identifies
concrete steps and a definite timeframe to achieve compliance with Section 345.
The U.S. Trustee encourages the debtors here to act promptly to ensure full compliance with Section
345, and we reserve the right to be heard on the cash management motion at the final hearing.
Thank you, Your Honor.
Thank you, Ms. Leeming. Is there any other
parting interest that would like to be heard with respect to the debtor's cash management motion?
Okay. Seeing none, I've reviewed the motion and order. I'm satisfied that the relief sought
is warranted under the circumstances, and we will enter that order on interim basis.
Thank you, Your Honor. The next item on the agenda at Docket Number 12 is the debtor's
critical vendors motion. By this motion, the debtors are seeking authority to pay certain
pre-petition claims of certain vendors who will be essential to the debtor's post-petition
wind-out efforts on a go-forward basis. As described in greater detail in the motion,
the critical vendors include, among others, suppliers of certain essential services,
including terminal security to protect the debtor's valuable rolling stock assets.
The debtors have tailored the critical vendor relief to only that relief which is necessary
to avoid irreparable harm to the debtor's wind-down efforts and their objective to
maximize the value of their estates. To give the debtor the ability to make
the most of the money that he or she has earned from the past, the debtor is only seeking
relief from the state's debtor's estates. To give Your Honor a sense of just how
nearly we tailored this relief, the critical vendors represent less than 1% of the debtor's
total vendor population. For today's purposes, we are only seeking relief to pay pre-petition
critical vendor claims up to $1 million on an interim basis. Your Honor, the lenders in the
motion are rejected to this motion. Unless Your Honor has any questions, we respectfully
request that you enter the proposal. Thank you. Is there any parting interest
that would like to be heard with respect to the critical vendor motion?
Okay. Seeing none, I've also had a chance to review that motion in order. I'm satisfied
that the relief sought is warranted here, and we will enter that order on an interim basis.
Thank you, Your Honor. The next item on the agenda at docket number 12 and supplemented
by docket number 148 is the debtor's customers collection motion. Earlier today, we filed a
supplement to the debtor's customer collections motion following discussions with the United
States Trustee's Office. Attached as exhibit aid to the supplement is a declaration of Mr. Michael
Leto in support of the motion. As a preliminary matter, Mr. Leto is on the Zoom line today,
and I'd ask to move his declaration into evidence for the purposes of this motion,
subject to the party's rights to ask him questions if they would like to.
Got it. So first, Mr. Dickinson, I apologize. I think you said this was at DI-12, if I'm
understanding. I think this is at DI-19, and the critical vendor's was DI-12. Do I have that?
I apologize, Your Honor. I misspoke. Okay, no worries. Okay, so DI-19,
and so you're now moving into evidence. Mr. Leto's declaration, which I believe is at DI-148.
Is there any party in interest that would like the opportunity to be heard with respect to the
motion to admit Mr. Leto's declaration to evidence? Okay, seeing none, that will be
admitted. Is there any party in interest that would like the opportunity to cross-examine Mr. Leto?
All right, seeing none, Mr. Regal, you can proceed.
Thank you, Your Honor. By this motion, and as clarified in the supplement, the debtors are
seeking authority to consent to a modification of the automatic stay solely to permit the set off
of certain customer claims against the debtors. Further, the debtors are seeking authority,
but not direction, to continue to administer certain customer programs and honor undisputed
pre-petition obligations related thereto. As described in greater detail in our pleadings,
the debtors have approximately 465 million in an accounts receivable from their customers.
These receivables are clearly a very valuable asset of the estates. On the other hand,
in connection with the customer programs, the debtors owe their customers approximately 60 million
on account of such pre-petition programs. Your Honor, our customers' refusal to remit to the
debtors the amounts owed on account of the accounts receivable would irreparably harm the
debtors' estates because the debtors may be unable to collect a significant portion of their
accounts receivable, which is critical to these Chapter 11 cases. And to that end, we are seeking
entry of an order to facilitate set off negotiations with our customers on a customer member by
customer basis, which would be conditioned upon such customers promptly remitting accounts
receivable to the estates. We believe that permitting the debtors to negotiate set offs on a
customer by customer basis and to continue programs in the ordinary course will be essential to
maximize in the debtors' collection efforts. I want to be clear, Your Honor, the debtors do not
intend on consenting to a set off for any customer who does not agree to promptly remit outstanding
accounts receivable to the debtors. As I previously mentioned, we worked with the Office of the United
States Trustee prior to the hearing to answer their questions and resolve all concerns. No party is
objected to this motion, and unless your partner has any questions, we respectfully request that
you enter the order.
Thank you. Is there any party in interest that would like to be heard with respect to the customer
set off motion? Okay. Seeing none, I've had the chance to review the motion.
I've had the chance to review the motion and the proposed order as well as the supplement to the
motion, and I'm satisfied that the relief sought is appropriate and in the best interest of the
estate, and we will enter that order on interim basis.
Thank you, Your Honor. That brings me to the end of the motions that I was covering today. So I
would like to at this time pass the podium off to Mr. Nash.
Okay, very well. Thank you, Mr. Jacobson. Mr. Nash.
Thank you, Your Honor.
Thanks, Judge. I'm back to talk about the potential use of cash collateral.
Pleased to report that we do have the specific consent of the ABL lender, which is Mr. Dunn,
helpfully reminded all of us they control, but we do think that we're doing this with the consent of
all of the pre-petition secured parties. We have consent, Your Honor, for the limited use of cash
collateral through, I believe, next Wednesday, either until next Wednesday or through next
Wednesday. And specifically, Your Honor, at docket number 156, we filed a cash collateral budget that
will be operated for the next five days. And what we have agreement with respect to,
Your Honor, is approximately $16 million in wages, which are due tomorrow or payable tomorrow,
Friday. We also have agreement with respect to the payment of approximately $2.6 million in
insurance premiums, insurance which ensures the collateral, Your Honor. And we also have
an agreement to pay approximately $1 million in critical vendors. About 500 of that is post-petition
and about 500 of that relates to pre-petition consistent with the motion that was presented a
few minutes ago. And, Your Honor, the reason we seek that now is specifically that $1 million
targeted towards security providers who are safeguarding the collateral around the country.
And also collection agencies who are overseeing in real time the collection of yellows accounts
receivable. We don't have, Your Honor, filed, we have an agreed, you know, cash collateral order
with this, an interim cash collateral order that would be operative for the next five days. And
that is out, you know, being reviewed by parties. We don't have it, it's not in front of, Your
Honor, so we can't page flip it. I do think it's relatively guarded variety and it's only going to
be in effect for the next couple of days. We did win their grant replacement liens and claims
to be pre-petitioned secure parties to the extent of any diminution in their collateral over the
next five days. And otherwise, Your Honor, I think that when this order is uploaded, you'll find it
unproblematic. Okay. Let me ask this. It's being distributed and is the suggestion that it's being
uploaded will essentially amount to a representation that all of the affected parties have signed off
on its terms? Yes, sir. Okay. Is there anyone who objects to proceeding on that basis or would
require a certification? Okay. I don't see anyone objecting. So I'm happy to proceed on that basis.
Obviously, if I have questions on looking at it, I'll reach out. But otherwise, in the absence of
questions or concerns on my own, I'd be happy to end. And I do appreciate the time sensitivity to
upcoming payroll and the need to have access to cash collateral. Mr. Su? Your Honor, Your Honor,
I just wanted to set out on the record the conditions under which a treasury is consenting
to the short-term use of the cash collateral. One of the issues is that the cash collateral budget
remains subject to treasuries review and consent. And we ask that we receive the budget sufficiently
in advance of hearings so that we can actually review the budget before the hearings. As Mr.
Nash mentioned earlier, we understand that the cash collateral order that we had negotiated
will be implemented in connection with any good financing. And that includes the company's
commitment, among other things, to pay treasuries agreed upon adequate protection payments
consisting of cash pay interest at the default rate and the payment of professional fees and
expenses. And we also, and also a commitment to not prime treasuries' links in respect to the
Trunch B priority collateral or the Trunch B joint collateral. And that one of the conditions is also
that the commitment that treasuries collateral will be so consistent with a milestone set forth
in the cash collateral order subject to modifications which may be agreed to by the treasury.
And the bidding procedure shall be reasonably acceptable to treasury. And that the dip budgets,
the sizing, the maturity, and all the dip terms affecting treasuries' rights and interests
with the sale process will be reasonably acceptable to treasury. And as adequate protection for the
interim use of cash collateral, we agree that we will continue to receive the adequate protection
links and super priority claims, accrual of adequate protection payments, and no expenditure
outside the cash collateral budget. That's what we agree to. So I just wanted to confirm on the
record now. All right, except that you confused me a little bit. So as I understand the current,
the debtor's current ask, they're asking for authority to enter into an order that would
provide for the use of cash collateral for five days pursuant to a budget that has already been
docketed. So with respect to all of your rights, with respect to some future dip order, I don't
think they're affected, but your reservation of rights with respect to all those things
gave me a moment of pause to ask me whether I misunderstood what's actually in front of me.
Mr. Nash, am I right that all you're asking for is this five-day use of cash collateral
pursuant to an order that the parties will have signed off on and that everyone's rights with
respect to what happens with respect to a future dip motion is everyone's rights are fully reserved
with respect there too? Do I have that close to right?
Perfectly correct, Your Honor.
Got it. Okay. Mr. Mintz.
I want to make sure we have an understanding here because we had a back and forth with Mr. Nash
before this hearing that Mr. Soot was putting on the record, which was a commitment from the debtor
that the terms of the cash collateral order that was specifically negotiated for US Treasury
would be part and parcel of any dip financing that is ultimately presented to the court.
So that is a commitment that goes beyond the five-day period that we're talking about now.
And we had an understanding with the debtor that that was a commitment that they would put on the
record and that is a condition to our willingness to consent today. I believe I did that, Judge,
more than once. Okay. And maybe it may have been only that I introduced the confusion. So to the
extent that the thing I did, I apologize, but it sounds like Mr. Mintz, are you satisfied with Mr.
Nash's representation? Not by any one.
Okay. And apologies to all to the extent that I made it more complicated. So the person who's next
introduced himself last time and I confess that your name fell out of my head. My apologies for
that, but let me give you that opportunity to proceed. Thank you, Your Honor. It's Kevin
Samardich at Alamastore for Citizens Bank as the AVL agent. As Mr. Nash stated, this is a very
short-term use of cash collateral motion. It is a very limited budget. No parties, these expenses
are being paid, including the AVL agent. That will all be addressed in the final,
you know, wherever we land on the dip order or cash collateral order. The idea here is to
bridge this better for the next week to allow them to solidify the dip proposal. As Mr. Dunn stated,
under our inter-credit agreement with the U.S. Treasury and the term lenders, as the order is
limited solely to the AVL proceeds of the AVL priority collateral, Citizens Bank can consent
in the other parties that deem to have consented. That's not our goal here. We hope everybody reviews
the order and is satisfied with it. We provide it at a protectionally and some priority administrative
claims to the Treasury and to the term lenders. However, you know, deep being that's the road
will go so this data can move forward, pay its employees, and get to get the next stage of this
case. Thank you. Thank you. Ms. Leamy, I think you're next then. Mr. Silverman. Thank you, Your Honor.
Just to follow up on a point Your Honor made earlier, I think since this is a new order that
hasn't been – a form of which hasn't been filed yet, I think it might be better to ask the
parties to file the neuro-certification at council just to make sure that any party that thinks it
should have reviewed it already has done so before it's presented to Your Honor.
Okay. Mr. Nash or Ms. Jones, any objection to proceeding as Ms. Leamy suggests?
Go ahead, Rocky. Go ahead. I'm sorry, Mr. Nash. No, just mechanically, Your Honor, yes, we can
do the neuro-certification at council so that it's submitted to the court.
Okay. Very well. Thank you. Mr. Silverman. Thank you, Your Honor. Very briefly, just for the record,
on behalf of Bank of New York Mellon, we read it to reiterate and adopt the statements on that Bank
of New York Mellon that Mr. Hsu and Mr. Mince made with respect to treasure.
Okay. Very well. Okay. So Mr. Nash, I guess back to you. Where to from here?
So that concludes everything we have in front of Your Honor today, and we will be in touch with
your chambers real time with respect to the time that you graciously allotted us on Friday morning,
whether that will be in person or Zoom. Thank you, Judge.
Okay. Thank you, Mr. Griezmann. I see you've also raised your hand. Let me give you a chance to be
heard. Sure. Thank you, Your Honor. We just reviewed, it was just sent over the so-called
junior facility proposal, which I think, at least based on the one paragraph that was contained in
the letter, it was junior name only. We don't have to get into details on this call, on this
hearing at the moment, but I'd like Mr. Nash to commit to getting on the phone with us and with
the Mill Bank team to discuss the pro parameters of Friday's hearing, whether they truly intend to
have evaluation trial on Friday, or whether we're going to try to work through what is, I think,
a questionable proposal for junior financing and how we plan to handle the next 36 hours.
There's been weeks of negotiations over this facility. They have toggled now, really on almost
a moment's notice, to a contested hearing on Friday, and we'd like to figure out how that's
all going to work. So we don't have to get into it on the call on this hearing, but I'd like to get
on the call with Mr. Nash and his team and Mill Bank team immediately or as soon as possible at this
hearing. Okay. I take it Mr. Nash, you don't have an objection to continue discussions with affected
parties with respect to the relief you're seeking. As you might expect, Your Honor, I do not. Okay,
very well. Okay. Let me start by, well, finish by thanking all of the parties for the, oh,
I guess while we're here, what we haven't done, and I'm not sure we need to do this now or we
could do it on Friday, is for the relief that's being entered on an interim basis, I guess if
you're going to serve out those orders, we should probably include a date for a second day hearing.
Does it make sense to address that now or would you prefer to come back to that on Friday? Ms.
Jones, do you have a preference in that regard? No, Your Honor, that's totally to the corner.
Your chambers had reached out seeking a date, and I'd advise that it's probably 21 to 25 days out for
things like the finals of pretensions or other utilities, things like that, that are interim
type orders. So we stand at Your Honor's pleasure on that. Obviously, Your Honor, the only reservation
I would make is depending on how JIP is moving through with respect to Mr. Nash and his team,
obviously, Your Honor, I'd want to stay flexible on that. Okay. Mr. Nash, any other thoughts?
Should we identify a date or do we just come back to that on Friday? Whatever works for Your Honor.
Wood penciling in September 18th at 2 o'clock, does that work for the parties?
Works for me, Judge. Mr. Honor, we can do that for a second day for all the other
type motions. Terrific. And we'll see where Mr. Nash ends with respect to whether we need to use
that in any respect for JIP financing. Okay, very well. So let's plan on the ordinary second day
materials, you know, motions to be considered for final approval on that date. And obviously,
with respect to the JIP, to the extent there are moving parts, we'll address that as it arises.
Okay. Look, I appreciate that this case arises in unusual circumstances and presents a number of
challenges. I do appreciate the debtor's efforts to obtain the most favorable
DIP terms that it can, consistent with its fiduciary obligations. So everyone's efforts here,
appreciating that everyone's substantive rights are fully reserved, are appreciated.
So let me thank all of you for the good and hard work you've done. And with that, I guess we will
see you on Friday in some form or fashion. If there's an emergency that arises between now and
then, of course, you know how to find us to the extent orders are uploaded. We will enter those,
subject to the filing of a certification for the cash collateral order. And then,
and with that, and my thanks, we're adjourned.