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Telephone directories business Yell Group (LSE:YELL) has officially announced it is seeking to re-negotiate its loan term. The company behind the British Yellow Pages has been struggling under debts of £2.6bn after borrowing heavily to fund European expansion, while it has also faced stiff competition from Google.
On November 8, it announced it was speaking with lenders. Yesterday, November 14 it presented its proposals. The company hopes to eventually spend £160m buying back its own bonds as part of an overall plan to increase headroom. The immediate plan – to relax loan terms to provide around 20 per cent headroom under its net debt to earnings (EBITDA) covenant until 2014 – requires the agreement of two thirds of its lenders (by value) by November 30.
CEO Mike Pocock, who stepped into the role in January, is attempting to turn Yell into an online business. However, as revenues continue to decline, the company had become in real danger of breaching covenants. Yell’s chairman Bob Wigley, former head of European operations at Merrill Lynch had already steered the company out of immediate trouble in 2009, helping to reduce debt from £4bn with the help of refinancing and a £660m cash call.
Yell is promising that if leverage exceeds 4.60:1 by March 2013, lenders will receive a fee of 2% of their holding. The company is also offering to increase the amount it spends buying back its own corporate bonds by over £50m to £159.5m, and to reduce its revolving credit facility to £30m from £173m.
The company had previously said in a statement to investors: “None of the alternative strategies available, for example running the existing business for cash or selling off part of the business, provide any real chance for Yell to be able to repay its debt.”
Following yesterday’s release of the new loan plan, shares performed strongly today, jumping over 58% by close of play.
References
↑ YELL news on ADVFN
↑ YELL buy back debt loan terms – The Guardian
