I heard that this came from debtwire? I have no idea… someone might have made it up to simply harass me haha, figured i’d share and let you all speculate. after all, the title of this website is globalspeculation.com. my advice is go sign up for debtwire.com and see for yourself. let me know how it goes.
Yellow Media bondholders plan organization, Goodmans and Bennett Jones make legal pitches
Story:
Organizational efforts amongst holders of Yellow Media’s CAD 1.4bn of senior unsecured bonds gained steam this week as holders fielded legal pitches from a who’s who of Canadian law firms, according to five bondholders and a trader. Counsel from the restructuring groups at Bennett Jones and Goodmans LLP are the lead dogs in the race to procure a mandate, one of the bondholders and a trader added.
The 2.7x levered yellow pages producer is under pressure to slim down its balance sheet as an earnings decline threatens management’s ability to address near term debt maturities. The company has CAD 665m of debt coming due in 2013. The near-term maturities include a CAD 250m revolver – CAD 230m is outstanding – and a CAD 180m TL, both due in February 2013. A CAD 130m 6.5% senior unsecured note then comes due in July 2013, ahead of the December 2013 maturity of a CAD 125m 6.85% senior unsecured note.
Bondholders aim to organize in an effort to ensure that a potential restructuring treats their unsecured claims as pari passu with Yellow’s CAD 410m of unsecured bank debt, the trader a second bondholder said. Additionally, because the Bank of Montreal and Canaccord Genuity advised company doesn’t need to enact sweeping operational overhauls, holders prefer a restructuring through an out-of-court CBCA arrangement rather than a more costly CCAA process, said two of the bondholders and a financial advisor.
“Unlike in the U.S. (where prepackaged bankruptcies) typically need 95% on board, in a CBCA only two thirds of (creditors) need to agree to an exchange,” commented the financial advisor. According to the company’s bond indentures, a 75% principal amount of bonds need to approve any type of modification.
Separated by years
While the preliminary bondholder push to organize considers keeping the company’s eight classes of unsecured bonds united in an ad hoc group, a potential dividing line could be drawn down the road should the company target only near term notes in an exchange, three of the bondholders said. In that scenario, a separate group of later dated bonds could choose to mobilize with its own counsel. “The question is whether (the company) is going to address the whole capital structure or just the 2013 – and possibly 2014 – maturities,” said the second bondholder.
The indentures backing the bonds, which were initially investment grade when issued between 2004 and 2007, do not prevent the company from treating classes differently in a restructuring, noted an attorney from Covenant Xtract, an affiliate of the FT Group.
Yellow’s CAD 125m 6.85% notes due December 2013 are quoted 58/60 today from 58.5/60.5 last week, said the trader. The late-dated CAD 300m 7.75% notes due 2020 are quoted 49.75/49.75, up from 42.75/51.25 on 29 February.
While it is not clear what form a delevering transaction will take at Yellow, a possible scenario discussed amongst bondholders would be exchanging the total debt load for a combination of new secured notes, equity, and warrants, said the second bondholder. The trader added that the company likely needs to cut its debt load down by around 40%-50% to CAD 800m – CAD 1bn.
Holders of the illiquid bank debt – a syndicate led by Scotia Capital that’s working with legal counsel McMillan LLP – are likely to push for a par recovery, according to a sellside source. However, the second bondholder disagreed, maintaining “there is going to be a haircut for everyone. ”
At 9 February, Yellow’s liquidity consisted of CAD 280m of cash and limited revolver availability, as reported.
Messages left for officials at Yellow Media, Bennett Jones, and Goodmans were not returned.
by Aleksandra Snesareva, Jon Berke, Reshmi Basu