A beleaguered trucking business that received a $700 million pandemic-era loan from the federal government may be forced to file for bankruptcy protection this summer amid a dispute with its union, a development that could leave American taxpayers stuck with a failed company.

The financial woes at the business, Yellow, which previously went by the name YRC Worldwide, have been building for years. The company lost more than $100 million in 2019 and has more than $1.5 billion in outstanding debt, including the government loan. In 2022, YRC, which ships meal kits, protective equipment and other supplies to military bases, agreed to pay $6.85 million to settle a federal lawsuit that accused it of defrauding the Defense Department.

In 2020, the Trump administration, which had ties to the company and its executives, agreed to give the firm a pandemic relief loan in exchange for the federal government assuming a 30 percent equity stake in the company.

Three years later, Yellow is on the verge of going bankrupt.

Since receiving the loan, the company has changed its name, restructured its business and seen its stock price plummet. As of the end of March, Yellow’s outstanding debt was $1.5 billion, including about $730 million that is owed to the federal government. Yellow has paid approximately $66 million in interest on the loan, but it has repaid just $230 of the principal owed on the loan, which comes due next year.

On Tuesday, Yellow sued the International Brotherhood of Teamsters for blocking the company’s restructuring plan and accused the union of causing more than $137 million in damages. The company said that it was taking “immediate steps to try to save itself” and that the union was trying to “cause Yellow’s economic ruin.”

The company’s financial plight is the latest example of how some of the trillions of dollars pumped out quickly during the pandemic were misdirected, mismanaged or obtained fraudulently. Federal watchdogs and government agencies have expressed alarm at signs of fraud and failing loans.

The office of the special inspector general for pandemic recovery, an independent agency within the Treasury Department that scrutinizes some of the relief money, warned last month that it was seeing an “alarming rate of defaults by borrowers who are failing to pay even the interest payments on the loans.” The office warned that the number of defaults on pandemic loans could increase over the next two years as payments come due.

On Tuesday, the inspector general for the U.S. Small Business Administration, which disbursed about $1.2 trillion in pandemic loans, said in a report that over $200 billion, or 17 percent, of the money was disbursed to “potentially fraudulent actors.”

Yellow’s loan enabled the company to stay afloat for a while and embark on a restructuring plan. But economic headwinds and a fight with the Teamsters union over the terms of a new contract have put Yellow in a precarious financial position.

In May, the company reported a first quarter loss of $54.6 million and Moody’s downgraded its credit rating out of concern about its dispute with the union. Yellow’s stock price has fallen by more than 70 percent to $0.99 a share over the past year.

The company has warned union officials that the standoff is putting Yellow’s fate at risk. Union officials claim that the company is being mismanaged and that the concessions it is seeking are unfair.

“Yellow has been unable to effectively manage itself for a long time — now the company says that it will be out of money by August,” Sean O’Brien, general president of the International Brotherhood of Teamsters, said in a video message broadcast on Facebook to Yellow union members this month. “These executives have no idea what they are doing, they have driven this company into the ground.”

In a statement on Tuesday, Mr. O’Brien said that the allegations in Yellow’s lawsuit were “unfounded and without merit” and said that the company’s management failed its work force by being unable to live up to the terms of their contract.

The union’s current contract expires next year. The main points of contention are over whether hundreds of Yellow truckers would have to start loading and unloading freight at docks and a proposal that would give the company more power over where truckers have to work. Yellow needs the union to agree to the next stage of its restructuring plan so that it can seek additional financing and repay its debts.

The company said that it still intended to repay the loan that it received from the government and that it was negotiating in good faith and trying to save the jobs of its 30,000 workers.

“Yellow is engaging with all stakeholders in Washington and remains determined to negotiate a contract with the I.B.T. that works for employees, customers and shareholders,” Darren Hawkins, chief executive of Yellow, said, referring to the union. “Protecting 30,000 jobs is Yellow’s top priority.

In the lawsuit, Yellow said that it had sought the Biden administration’s assistance in brokering a deal to save the company but that the White House’s efforts were rebuffed by the union. The lawsuit says that Yellow had contacted Senator Bernie Sanders of Vermont for help and claimed that Mr. Sanders’s office said it was not interested in helping because Yellow was awarded the loan by the Trump administration.

The White House acknowledged it had discussions with Yellow and the union but declined to weigh in further on the matter.

“Our administration has been in touch with both parties, but we’re not going to comment on a legal dispute,” Michael Kikukawa, a White House spokesman, said. “The loan in question was provided by the Trump administration.”

Mr. Sanders’s office did not respond to a request for comment. A Treasury Department spokeswoman said that the agency continued to monitor loans made through pandemic recovery programs during the prior administration.

The Treasury Department also holds nearly 30 percent of Yellow’s common stock and the loan is secured by the company’s assets. If Yellow declares bankruptcy and has to liquidate, the U.S. government will take over much of the company’s trucking fleet and real estate holdings.

Yellow’s loan, which was awarded as part of the $2.2 trillion pandemic relief legislation that Congress passed in 2020, had raised questions of cronyism from the beginning.

A report last year produced by Democratic staff of the House Select Subcommittee on the Coronavirus Crisis found that the money had been doled out over the objections of career officials at the Defense Department and suggested that senior Trump administration officials had intervened to ensure that Yellow received special treatment despite concerns about its eligibility to receive relief funds. In addition to deep ties to the Trump administration, the company, which for years faced legal and financial troubles, also had a strong lobbying presence in Washington.

Although it is questionable whether Yellow is critical to national security, it is one of the largest freight trucking companies in the United States and its downfall would have a ripple effect across the nation’s supply chain.

UPS and ABF Freight have also been engaged in negotiations with the Teamsters over their contracts, amplifying uncertainty across the sector.

Chris Spear, chief executive of the American Trucking Associations, urged the union and Yellow to work with a federal mediator on a new contract to make sure that the company does not go bankrupt.

“It’s going to seriously impact the economy and the supply chain,” Mr. Spear said. “Capacity is already tight.”

Bruce Chan, a transportation analyst at the investment bank Stifel, said the shuttering of Yellow would lead to significant increases in the costs of shipping in the United States and force firms to find other carriers for their “homeless” freight. He noted that vulnerable trucking companies had been struggling under the pressure of changing consumer demand, which has shifted toward services and away from goods.

Although Yellow has found ways to survive financial troubles in the past, Mr. Chan likened the current union dispute to “squeezing blood from a stone.”

“It looks pretty tough for them,” he said.

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