Yellow Media bondholders planning to restructure

Halifax, Nova Scotia Yellow Media's bondholders are seeking to take over the phone directories publisher in a debt for equity swap that would push out existing shareholders.

Senior-ranking bondholders owed C$1.4 billion (Dh5.1 billion) organised a call last week to discuss a plan urging the company to seek a plan of arrangement, a court-ordered restructuring through the Canadian Business Corporations Act, according to two bondholders on the call.

"Management would be fools not to consider this," said John O'Connell, CEO of Toronto-based Davis Rea, a holder of the bonds who wasn't on the call. "The people who have the biggest vested interest in this company are thinking about ways to restructure it and that's a positive outcome. I think the bondholders will wind up with most of the company."

The move by senior bondholders to seize Yellow Media in exchange for writing down its debt is stemming declines in the value of the Montreal-based phone book company's bonds, O'Connell said. Yellow Media's value has halved this year as the publisher tries to remake itself into an online business as customers eschew phone books in favor of smartphones and tablet computers.

Compromise

Yellow Media's C$550 million of 5.25 per cent notes due February 2016 have risen to 46 cents on the dollar from 38 cents a month ago. The company's C$300 million of 7.75 per cent notes due in March 2020 have risen to 45 cents on the dollar from 38.

"This should give a floor to the bonds," O'Connell said. "We own the 2016 bonds and we're quite pleased."

"It increasingly looks like there will be some sort of compromise with existing creditors," said Chris Diceman, an analyst at DBRS, which downgraded its rating on Yellow Media to B [low] from B [high] this week.