As tens of thousands of workers are being laid off in the bankruptcy of one of America’s largest trucking companies, one player in the collapse is set to get at least some financial protection: Apollo Global Management, a politically-connected private equity firm that owns a huge chunk of the company’s debt.
The trucking company, Yellow, received a $700 million taxpayer-funded bailout from President Donald Trump in 2020, shortly before Apollo’s co-founder and his wife donated $1 million to Trump’s reelection campaign.
Though Trump constantly depicts himself as a pro-worker populist, his administration’s bailout of Yellow was structured to permit Apollo to get paid back in bankruptcy before the government. The result: Truckers now face mass layoffs and taxpayers could see hundreds of millions of dollars of losses — all while the Trump donors’ Wall Street firm benefits from a government-funded cushion.
This week, Yellow filed for Chapter 11 bankruptcy and announced it would be shutting down, three years after receiving a $700 million pandemic loan from the Trump administration. Yellow moved freight for major companies including Walmart and Home Depot as well as the Department of Defense and employed more than 30,000 workers, most of them members of the Teamsters union — which Yellow has scapegoated for its financial distress.
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Because of how the government's loans to Yellow were structured, the federal government stands third in line to get paid back, behind Apollo and a group of banks — loan terms that a congressional oversight committee found were more generous than Yellow had sought, according to federal records reviewed by The Lever.
Apollo acquired a substantial stake in Yellow just before COVID hit, meaning the firm was a major beneficiary of the government’s bailout of the distressed company. Robert Rasmussen, a bankruptcy expert and professor at the University of Southern California Gould School of Law, said that the Trump administration could have leveraged this fact to negotiate a better position on the creditor list, but apparently chose not to do so.
“If this had been a commercial loan, you would think the lender would have said, we will lend you money so that we come maybe second in line,” Rasmussen said. “And if you don’t let us come second in line, we won’t put money in. While Apollo would have had the right to say no, you would have expected a negotiation where they may have given up a little bit, because they had an interest in the company getting a $700 million infusion of cash.”
Apollo, a New York-based private equity firm with more than $600 billion assets under management, had significant ties to the Trump administration.
In 2017, Apollo loaned $184 million to Kushner Companies, the family real estate firm of Trump’s son-in-law and senior adviser Jared Kushner, to refinance a mortgage on a Chicago skyscraper. That loan came after Apollo co-founder Joshua Harris started advising the White House on infrastructure policy.
The Trump Securities and Exchange Commission, chaired by finance industry lawyer Jay Clayton, dropped an investigation into Apollo weeks after the company extended the loan to Kushner. After Trump left office, Clayton became the lead independent director of Apollo.
When the pandemic hit, Apollo co-founder and now-CEO Marc Rowan contacted Trump administration senior officials, including Kushner, seeking relaxed restrictions on a separate COVID relief program that could benefit Apollo. In September 2020, Rowan and his wife donated $1 million to Trump Victory, a joint fundraising committee between Trump and the Republican National Committee supporting his 2020 reelection campaign.
Apollo’s third co-founder, Leon Black, was reportedly a personal acquaintance of Kushner. Black was recently accused of raping a young girl at now-deceased sex trafficker Jeffrey Epstein’s New York townhouse.
Apollo and its subsidiaries spent $4.7 million lobbying the federal government in 2020, according to OpenSecrets.
Apollo partner John Bookout donated $85,000 to Trump Victory in the 2020 cycle. New England Patriots owner Robert Kraft, who served on the Apollo board until 2021, donated $1 million from his Kraft Group LLC to the Trump inaugural committee in late 2016.
Former Sen. Pat Toomey (R-Pa.), one of four members of the COVID Congressional Oversight Commission set up to oversee pandemic relief spending, joined Apollo’s Board in February after retiring from the Senate. The oversight commission’s final report on the Yellow loans was released in June.
COVID Cash
The $700 million loans to Yellow were granted under a provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that authorized the Department of Defense to issue loans “critical to maintaining national security.”
The loans to Yellow made up 95 percent of such national security loans given out — even though career Pentagon officials had advised that Yellow was not “critical” to national security.
In September 2019, a group of affiliates led by Apollo loaned Yellow $600 million at a high interest rate, 7.5 percent above the base London Interbank Offered Rate, an industry standard interest rate. When COVID hit, Yellow faced an onerous debt load and sought a bailout to stave off bankruptcy.
Yellow’s CARES Act loan came in two parts: $300 million to cover expenses including health care and pension liabilities and interest payments, and $400 million to finance tractor and trailer purchases. The government took a 30 percent equity stake in Yellow as a condition of the loans.
A House investigation later found that Yellow initially proposed loan terms that were more favorable to the government, but instead the Trump administration negotiated a deal that left taxpayers in a vulnerable position if the company went bankrupt.
“The select subcommittee obtained a legal analysis conducted by Yellow’s own counsel that demonstrates the Trump Administration agreed to terms even more generous than Yellow’s own lawyers contemplated,” according to an April 2022 report from the House Select Subcommittee on the Coronavirus Crisis. “The legal memorandum drafted by Yellow’s counsel concluded that Yellow would be required to give a higher-ranking collateral interest to Treasury and pay a higher interest rate than Treasury ultimately agreed to.”
In that legal memo, Yellow wrote that “the liens would have middle priority, between the current first-ranking creditors but ahead of the current second-ranking creditors,” adding that the government “would be compensated for this second ranking position” with a higher interest rate.
That’s not how it panned out. Instead, the House report concluded, “The loan to Yellow was made at an interest rate well below that charged to Yellow by private creditors led by Apollo only six months before the onset of the pandemic, even though Apollo received higher-ranking collateral interests than Treasury.”
Apollo is now Yellow’s “debtor-in-possession (DIP)” lender, meaning it is providing financing to the company as it unwinds its operations and sells off its assets, at an interest rate of 17 percent. Some of the DIP financing is being used to pay the government’s interest on its loan.
Yellow executives claim they intend to repay the government’s $700 million loans in full, but there are no guarantees, especially since Apollo and bank lenders will be paid first. Yellow has so far paid the government $66 million in interest and just $230 of the loan’s principal. Some experts doubt that the government will get paid at all.
“There's no way to sugarcoat this: Treasury's screwed on the Yellow loans,” Georgetown law professor Adam Levitin wrote in a blog post, citing the government’s third-in-line creditor position and the nature of the collateral.
The $400 million loan for Yellow’s truck fleet, Levitin said, certainly won’t be repaid in full because the value of the fleet will have depreciated since 2020. Levitin also said the government’s 30 percent equity stake will likely amount to nothing, given Yellow’s finances.
The Congressional Oversight Commission set up by the CARES Act raised this possibility in 2020.
“Given the company’s long-term non-investment grade rating and previous close calls with bankruptcy over the years, it is not clear that an equity stake in [Yellow] will provide much, if any, compensation or protection to taxpayers,” the commission said.
There may be another bailout in the bankruptcy: It is unlikely that the $50 million that Yellow owes to the Teamsters’ pension and benefit funds will be made. Instead, that liability will likely be paid by the federal government under the terms of Congress’ 2021 rescue of multiemployer pension plans.
