Yellow Media urges shareholders, debtholders to approve plan to cut $2B debt
Published on Thursday August 23, 2012 The Canadian Press
Yellow Media Inc. has told debtholders and shareholders to support its plan to reduce almost $2 billion in debt or else management will have to pursue other “less favourable” options.
Shareholders and debtholders will vote Sept. 6 on whether to approve the plan to recapitalize Yellow Media’s debt, which the Montreal-based directory publisher says is too high as it transforms to an online company.
“The recapitalization is urgent,” Yellow Media said in a news release on Thursday.
“Yellow Media’s current financial situation and a prolonged restructuring process will hurt the company,” it said. “If the recapitalization is not implemented, Yellow Media will be required to immediately pursue other options less favourable to the company and its stakeholders.”
Yellow Media didn’t elaborate on what the less favourable options would include.
Meanwhile, a group of lenders has filed a motion with the Superior Court of Quebec to challenge the company’s proposed plan to swap debt for equity.
The group, representing holders of 6.25 per cent convertible unsecured subordinated debentures, represents numerous retail and institutional investors.
It wants Yellow Media to withdraw the proposed plan of arrangement, which it says is unfair to the group, and has said it will vote against the proposal.
Yellow Media has announced a plan to cut its debt to $850 million from about $1.8 billion and has said it will use credit facilities, debentures and cash in the recapitalization transaction.
McMillan LLP, counsel for another group of lenders that includes major banks, has said it would be best for the company to withdraw its proposed restructuring plan under the Canada Business Corporations Act and instead enter further talks with stakeholders.
The Toronto-based law firm represents Canada’s Big Six banks — the Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank, Bank of Nova Scotia, Royal Bank and Toronto-Dominion — plus the Caisse Centrale Desjardins. They said they were owed $369 million plus interest by Yellow Media as of last Sept. 28.
Under Yellow’s plan, the banks would receive shares, bonds and cash in exchange for debt.
Yellow Media also said its debt-reduction plan needs to go ahead because it’s facing a substantial refinancing risk given that 44 per cent of current debt matures in the next 18 months. The company also said that the current debt had been trading at less than 55 cents on the dollar when Yellow Media announced the recapitalization plan on July 23.
The Montreal company also said opinions issued by BMO Capital Markets and Canaccord Genuity say the plan is fair from a financial point of view to the holders of preferred shares, common shares, convertible debentures and senior debt of Yellow Media.
As well, Glass Lewis & Co. and Institutional Shareholders Services Inc., two leading independent proxy advisory firms, have also recommended that common shareholders vote in favour of the proposed recapitalization, it said