Lenders group could block Yell restructuring plan

A vote to approve a financial restructuring at Yell to give it breathing space on its £2.6bn of net debt risks being blocked after a group of lenders registered their opposition.

A letter sent to the publisher of the Yellow Pages last week by the advisory boutique Moelis said lenders holding more than one-third of the group’s debts wanted it to reconsider the terms proposed. Moelis has been co-ordinator for institutional lenders seeking talks on a revised proposal. Yell declined to comment.

Those lenders are estimated to represent about 38 per cent of the debts, people close to the group said. No clear result in voting had emerged on Friday but a source said he believed the vast majority of investors who said they would vote against had done so. Yell needs two-thirds of debt holders to support the plan.

While the group is supportive of Yell’s turnround strategy, one of the investors said the terms were more favourable to Yell’s banks: HSBC, Royal Bank of Scotland and Deutsche Bank.

To allow the management of Yell to focus on a new strategy to turn the business round, it moved to renegotiate its banking covenants in an effort to give it an additional 20 per cent headroom. As part of the plan it is considering buying back £100m of debt to capitalise on the roughly 70 per cent discount to face value at which the debts trade in the market.

It also wants to reduce a £173m undrawn credit facility to £30m. Yell’s three key banks are HSBC, Royal Bank of Scotland and Deutsche Bank. The company asked HSBC in September to form a co-ordinating committee with which to negotiate its debt renegotiation.

The group of institutional lenders are opposed to such a big reduction in the revolving credit facility providers’ commitment at par, when they would have to take a 70 per cent loss to reduce their claims, one of the investors said. Along with the debt buy-back, the move would also reduce Yell’s cash on hand.

Yell is offering to pay a 50 basis point fee to those who vote in favour of the plan. In its letter, Moelis said the investor group, among other changes, wanted an additional 100 basis points paid to those lenders not benefiting from the reduction in the revolving credit facility.

Its shares were up 6.5 per cent at 5.9p on Friday.