Yellow Media reaches deal with creditors to avoid receivership
Jamie Sturgeon Jul 23, 2012 – 10:39 AM ET
Yellow Media Inc. has agreed to a plan with creditors that will hand the debtholders a majority equity interest in the beleaguered directory publisher and another $1-billion in secured and unsecured bonds, as well as cash.
While significantly diluting the stake of its existing shareholders — who have seen that stake evaporate in tandem with Yellow’s balance sheet in recent years — the plan allows Yellow Media to avoid receivership and focus on a turnaround.
“The recapitalization will ensure the necessary financial flexibility to pursue the company’s ongoing transformation in order to enhance long-term value for stakeholders,” Montreal-based Yellow Media said in a statement
The plan calls for $1.8-billion in debt to be swapped for 82.5% of the firm’s equity plus new notes amounting to $850-million, of which $750-million will be secured and come due in 2018. Another $100-million is unsecured and matures in 2022
Yellow said a significant number of unsecured holders have agreed to the plan and it expects to have the new capital structure in place by the end of September.
BMO Capital Markets and Canaccord Genuity were Yellow Media’s advisors.
In May, the company launched a special committee to evaluate alternatives to refinance its debt maturing in 2012 and beyond.
Yellow made its fortune publishing print directories packed with local advertising, going public in 2003 as Yellow Pages Income Fund. The $935-million IPO was the biggest such offering that year.
The unrelenting encroachment of local online ads has whittled revenues down steadily over time, however. Chief executive Marc Tellier is now trying to transition the company to an online and mobile marketing provider.
A group of senior bondholders organized themselves in late March, holding a conference call urging Yellow Media management to restructure the balance sheet by swapping debt for equity.