Position Update
Last week we had a hearing in the $YELLQ bankruptcy proceeding, so it’s time for another update! It’s taken me a few days to fully digest the hearing, but the good news is I think we got some amount of clarity as to which way J. Goldblatt is leaning, and how that will affect residual value for equity holders.
As a reminder, bankruptcy court judge J. Goldblatt denied an earlier motion that would have splintered the ARP pension issue into eleven separate arbitration proceedings. The net of it all is that the issue of ARP funding is being heard in the bankruptcy court where principles of equity often prevail.
That isn’t to say that statutes are ignored, or that the bankruptcy code itself is meaningless. Far from it. But bankruptcy court judges have a considerable amount of discretion to resolve ambiguity in ways that favor reasonable solutions. Given the lack of clarity in the ARP legislation itself, that is particularly important here.
So what were the parties arguing and what did we learn? Let’s dive in.
The pension funding issue is twofold, namely:
Did the ARP funding that CSPF and other MEPPs received absolve member plans from withdrawal liabilities?
If the ARP funding did not absolve member plans from withdrawal liabilities, does a 20-year contribution cap—which would substantially lessen Yellow’s total liability—apply?
As another reminder, a few years ago CSPF (the MEPP to which Yellow belonged) applied to PBGC (a federally chartered corporation created by the Employee Retirement Income Security Act of 1974) for nearly $36 billion (yes, B-illion) to help plug holes in its critically mismanaged pooled pension fund. The funding for this program came from the American Rescue Plan Act of 2021—an extension of the CARES Act passed to provide economic stimulus in response to the Covid-19 pandemic. PBGC granted CSPF’s request in December of 2022 for the full amount. CSPF now asserts that Yellow owes approximately $6B in withdrawal liabilities despite the funding, which eliminated unfunded vested benefits (“UVBs”) until at least 2050.
ISSUE #1: SATISFACTION OF WITHDRAWAL LIABILITIES