A Delaware bankruptcy court provided some clarity late Friday regarding $6.5 billion in withdrawal liability claims against Yellow Corp. The total amount the bankrupt less-than-truckload company will actually pay, however, remains to be decided. The mere fact that the estate will have to make good on some portion of the claims sent Yellow’s stock spiraling.

Shares of Yellow (OTC: YELLQ) fell 90% on Friday to 50 cents per share as stockholders realized their bet that the company’s asset value would exceed amounts owed to creditors may not come to fruition.

MFN Partners, which acquired a more than 40% equity stake in Yellow in the day’s leading up to a bankruptcy filing last summer, is the largest holder. However, the Boston-based private equity firm provided the company with bankruptcy financing during its liquidation, the interest and fees from which have helped offset its equity exposure.

The U.S. Treasury holds a 30% stake in Yellow. The equity was issued as part of a collateral package for a $700 million Covid-relief loan it provided to the company in 2020.

Multiemployer pension plans (MEPPs) to which Yellow once contributed claim the carrier’s abrupt shutdown a year ago means it’s now on the hook for its allocable share of unfunded vested benefits. However, Yellow has said that the plans are fully funded now, following a 2021 pension fund bailout package (the American Rescue Plan Act). Yellow contends its exposure is a fraction of the amounts claimed, if anything.

The legislation provided pension insurer Pension Benefit Guaranty Corp. the authority to craft guidelines to make sure the money would only be used to cover plan benefits and costs, and not to allow employers to skirt withdrawal liability.

Pension Benefit Guaranty Corp. created two regulations. The first said special financial assistance awarded to the MEPPs wouldn’t be recognized as a plan asset until the money was actually received. The second mandated the recognition of the funds would be phased in over time even though they were distributed in a lump sum.

The organization said the goal was to keep other contributing employers from using the bailout as a way to exit the plans. Immediate recognition would mean the MEPPs are fully funded, removing any unfunded vested benefits and consequently an employer’s withdrawal liability. That could have created a mass exodus from the plans, PBGC claimed.

Judge Craig Goldblatt’s Friday opinion sided with both the MEPPs and to an extent Yellow.

He said PBGC acted within its authority when putting up the guardrails on the program and that the MEPPs didn’t have to recognize the payments as an asset until received, and that they could be phased in. The implication is that Yellow is now responsible for some form of withdrawal liability to 11 different MEPPs that received government funds.

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Central States Pension Fund holds nearly $5 billion in withdrawal liability claims against Yellow. It was awarded $35.8 billion in special financial assistance on Dec. 5, 2022, but didn’t receive the funds until Jan. 12, 2023, after its plan year ended. Yellow filed for bankruptcy on Aug. 6, 2023. The unfunded vested benefit calculation used plan year 2022 to determine the amount owed.

“The regulations implement Congress’s specific directive in the American Rescue Plan Act that special financial assistance be used only to pay plan benefits and costs,” Goldblatt said. “The regulations prevent such funds from instead being used, in effect, to reduce amounts that employers would otherwise be required to pay upon withdrawal from a plan.”

However, Goldblatt also entered a partial summary judgment in favor of Yellow, citing that the 20-year cap (established by the Employee Retirement Income Security Act) should be placed on the company’s total withdrawal exposure. Essentially, the court ruled that Yellow is responsible for 20 times its annual contribution amount per the statute. Past court filings from Yellow have estimated a total liability of roughly $1 billion when using the 20-year cap.

Yellow previously asserted discounting to present value should apply to the 20-year stream of payments. However, Goldblatt said its default on the contributions accelerates the amounts to “presently due and owing,” and no discounting is needed.

He also upheld an agreement inked between Yellow and Teamsters funds in New York and Western Pennsylvania. Yellow reentered those funds in 2013 under a deal in which it would contribute just 25% of the usual rate, but it would repay any withdrawal liabilities assuming a 100% contribution rate if it withdrew.

Goldblatt directed the parties to hash out the actual amounts due. He said the task may be “relatively easy to resolve” now that the court has ruled on the disputed legal questions.

Yellow still faces a much smaller pool of withdrawal liability claims from pensions that didn’t receive special financial assistance.

The 11 MEPPs party to the Friday opinion received more than $40 billion in assistance from the government.

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