Yell plans £500m equity offering

Published 23rd September

Yell Group (LSE: YELL.Lnews) , the company behind the Yellow Pages directories, will launch an equity offering in a bid to raise at least £500m to pay down debt.

The group, which is currently struggling under a £3.8bn debt burden, aims to take that down to £3.3bn with the equity raising, before paying off a further £300m, either with any extra proceeds of the initial offering or by other means.

  • Proposals are today being presented to the wider lending syndicate including:
    • Extension of debt maturities to 2014;
    • New covenant package giving appropriate headroom to the company’s updated base case financial model;
    • Ability to diversify the Group’s funding sources through issuance of bonds or similar instruments; and
    • A new margin of between 3.5% and 4.0% over LIBOR payable to consenting lenders, depending on quantum of equity raised and future leverage levels and a consent fee of 1.25% payable to consenting lenders
  • Intention to launch an equity offering to raise gross proceeds of at least £500 million to repay debt and strengthen the Group’s capital structure.
  • Intention to reduce senior term debt by a further £300 million within 18 months, by way of a receivables securitisation, high yield bond, larger initial equity issue, or other means.
  • Agreement from the Group’s existing lenders is required before the proposed equity offering can proceed. Subject to this, the equity offering will be formally launched as soon as practicable and shareholder approval will be sought.
  • The above proposals have received indications of support from a significant proportion of the Group’s largest lenders. 
  • Current trading in line with guidance, with continuing strong cash flows and high cash conversion.

On 30 June 2009, Yell Group plc (‘Yell’ or the ‘Group’) announced that it had embarked upon a process comprehensively to refinance the Group and that this would lead to the Group holding discussions with its debt holders with a view to extending the maturity and changing the terms of its debt facilities and in due course, to discussions with its principal shareholders. These discussions and the resulting process were expected to take through to the Autumn to complete.

Since June, Yell has held discussions with a significant proportion of its largest lenders. The outline proposals announced today are the result of these discussions and will shortly be presented in detail to the full syndicate of the Group’s lenders. The process is consensual and the equity raising and debt proposals are inter-dependent. Subject to approval of the proposals by lenders representing 95% by value of Yell’s current term debt facilities, the equity offering will be launched as soon as practicable thereafter and a general meeting of shareholders called.


John Condron, Chief Executive Officer of Yell, said: ‘We have made good and constructive progress in a consensual process comprehensively to refinance the Group. It reflects the recognition of the robust and cash generative nature of Yell’s business model, which continues to show resilience relative to other media despite the current economic challenges. The process still has some way to go, but we believe the proposals developed as a result of our discussions with our principal lenders will deliver value to all parties, will support our Group through the current difficult economic times and ensure we are well positioned to benefit from any economic recovery.’


John Davis, Chief Financial Officer said: ‘Yell is trading in line with the guidance that we provided at the end of June, with particularly strong cash flows and high cash conversion but the economic environment remains challenging. The proposals we are outlining today would achieve an immediate reduction in net debt allowing the Group to deleverage more rapidly and to diversify its funding sources. We believe it represents a positive, credit-enhancing outcome for our lenders and increases the attractiveness of the Group to existing and prospective equity investors.’


Group financial outlook

Yell confirms its second quarter trading is in line with guidance given on 30 June 2009 and reiterated on 23 July 2009, when it indicated it expected revenues for the second quarter to be around 17% lower and EBITDA in the same period to be around 30% lower than the comparable period last year at constant exchange rates.

Trading conditions continue to be challenging and Yell believes it is too early to tell if confidence has returned to its core target customer base. As a consequence, Yell does not currently anticipate any significant improvement in the rate of year on year revenue decline for the remainder of the fiscal year. Its current expectation for the third quarter is for revenue to be around 16% lower than the same period last year at constant exchange rates.

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