Still several unanswered questions regarding Yellow Corp.’s $700M loan

December 13, 2021

Tyson Fisher


Congress wants to know why Yellow Corp., a company that was struggling financially and fighting a lawsuit filed by the federal government, received a massive national defense loan from the coronavirus relief bill.

A congressional commission overseeing distribution of the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act is waiting for the Defense Department to turn over documents related to Yellow Corp.’s $700 million loan.

Last July, Yellow Corp. received the loan through the coronavirus relief bill, which was intended to help out businesses affected by the pandemic. However, the Overland Park. Kan.-based trucking company began a financial struggle in 2019 after the Justice Department announced a lawsuit claiming the company overcharged the Defense Department by potentially millions of dollars. Consequently, lawmakers are questioning Yellow Corp.’s eligibility for the loan.

The coronavirus relief bill created the Congressional Oversight Commission to monitor the $500 billion allocated to the Treasury Department, including $17 billion reserved for “businesses critical to maintaining national security.” That money has been left mostly untouched.

A total of $753.9 million has been given to 11 businesses as part of the national security loans. However, 95% of that money is for Yellow Corp.’s loan.

“The Treasury has defined a ‘business critical to maintaining national security’ as a business that is at the time of its application performing under a defense contract of the highest national priority or operating under a top-secret facility security clearance,” the commission stated in its July 2020 report. “YRC apparently did not meet either of the two national security eligibility criteria.”

The Congressional Oversight Commission is supposed to be a bipartisan, five-member panel. However, only two lawmakers currently serve on the commission: Rep. French Hill, R-Ark., and Sen. Pat Toomey, R-Pa. In a news release issued on Dec. 1, Rep. Hill said the Defense Department had not responded to his requests.

Defense Department has not “fully responded” to Congress’ requests

When asked about the delay, the Defense Department said it was cooperating. However, the two lawmakers left on the Congressional Oversight Commission say their requests have not been fulfilled

The report claiming the commission has not received documents was released on Nov. 30. The Defense Department claimed otherwise, providing Land Line with the following statement:

“DoD has been responsive to the Congressional Oversight Commission’s request for information and documents related to the CARES Act Loan programs run by the Treasury Department. The department has sent two sets of documents – one each in response to the two requests from the commission.”

In response, Rep. Hill’s office told Land Line in an email that the Defense Department “has not fully responded to the (commission’s) two separate requests.” Sen. Toomey’s office confirmed.

The Defense Department declined to provide additional comment.

Struggling to skyrocketing stock prices

Before the pandemic, Yellow Corp. had taken a financial hit. Since receiving the coronavirus relief bill loan, its stock prices have risen significantly.

The most recent financial problems for Yellow Corp. can be traced back to when it was sued by the U.S. government. A separate lawsuit filed by shareholders claims that the company knowingly withheld information contained in the lawsuit, including a federal investigation. Stock prices began to drop after the Department of Justice announced the lawsuit in December 2018.

Yellow Corp. stock prices chart
Yellow Corp. stock prices from January 2019 to Dec. 9, 2021. Arrow indicates when the $700 million loan was announced.

According to Yellow Corp.’s financial records, the company had an operating cash flow of nearly $225 million in 2018. That changed following the government’s investigation going public.

In 2019, the trucking company reported operating cash flow of only $21.5 million. Although 2020 was much better, cash flow was still about half of what it was in 2018.

Yellow Corp.’s cash flow was nearly $16 million in the red in the first quarter of 2020, with the economic effects of the pandemic hitting at the end of that quarter. In the second quarter – before the Treasury Department announced the loan details – the company reported an operating cash flow of nearly $214 million, nearly matching 2019’s annual cash flow.

However, the company had to suspend health benefits to all employees in May 2020. Yellow Corp. was delinquent in paying health contributions for work performed that March.

Hedging its $700 million bet, the Treasury Department received a nearly 30% share of Yellow Corp. stock. Just before the deal was publicly announced, the trucking company’s stock was trading at $1.57 per share, a value of about $25 million for the Treasury. Nearly 18 months later, the stock is trading at more than $14 per share, a more than 800% return. That is despite quarterly reports showing cash flow in the red during the first two quarters. Third quarter results plummeted by more than 90% compared with last year. The government’s share of the company is now valued at more than $220 million. LL