Let me bring you up to speed.
– AGM May 8th.
– YLO has the book, the app, yp.ca and Mediative (web design, hosting for SMEs).
– YLO securities are: commons, prefs A B C D, debentures, MTNs.
– Dividends on commons and all prefs have been suspended (but cumulating on prefs). Debenture interest continues to be paid.
– YLO has access to bank loans referred to as LOC and NRT. See my timeline. I and others have calculated that YLO will meet its MTN maturity obligations provided revenues stabilize. Others have stated “it will be close”. I am not aware of anyone who has stated YLO will default. There are comments however that YLO can’t just pay debt, they have to invest heavily in Mediative and 360 in order to not be dead in the water.
– There is a debate if YLO’s business model is handicapped because of fewer signed ad contracts (because of Google) and smaller margins (because of the free wheeling nature of the Internet). Numbers have showed increases in online sales but not enough to account for the loss in print. Some feel that will change, some don’t.
– Commons are trading at ~7¢. Appears flatlined. Trading like a pre-ccaa co.
– Q4 call, YLO stated 2012 would see a “refinancing”. Some think that may include CBCA or CCAA. Mr. Robertson heading the new financial committee once was on the AbitibiBowater team that did a ccaa.
– YLO has drawn down on the bank LOC causing many to question their intent. YLO has stated they are wanting to have the cash available, nothing more, nothing less. (paraphrasing)
– Pref As are now subject to conversion at any time in a 12:1 ratio. Should this happen it would retire pref As but cause dilution of the commons. Pref Bs will be eligible for conversion as of July.
– There are concerns surrounding the silence of the BoD. Many investors are wondering how they should vote i.e., either remove the board or trust them (to work for shareholders rather than bondholders or employees) and hope for the best after the AGM.
– The overall economy has put pressure on advertising revenues.
– Some value investors like myself have taken up fairly large low cost positions across commons, prefs and debentures on the grounds that YLO’s business model is viable, its products unique, simple, effective & needed. The brand is established. The presence of a near-monopoly (after the merging of Canpages). A massive 1/3 reduction in debt over 3 years. Maturities far out enough in the future to allow enough time for 360 to stabilize revenues.
– There are questions if YLO decides to restructure its debt what will be affected e.g., just the MTNs, maybe the debentures, maybe just the prefs, or a mix of everything. It could means a wiping out of common shareholders, or it could mean a haircut to some or all security holders. It’s possible that those who bought in at pennies on the dollar would actually gain from restructuring. There are many different outcomes, no one knows anything of what is being planned at YLO.
– There is talk/wishes that YLO buy back distressed debt while they still can. No evidence this is going on, or planned, or possible due to bank loan covenants (which some parts remain frustratingly secret).
I left out a lot of stuff but that should be a good start for you. All my opinion of course.
All in all, a very high-risk high-reward position to take at this time.
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