Goldman Sachs chosen to sell Yellow Pages, - again

By Gareth Vaughan Yellow Pages Group's banks have picked Goldman Sachs JBWere, the firm that advised Telecom on its blockbuster NZ$2.24 billion 2007 sale of the directories business, to again try and sell the now debt stricken firm. Interest.co.nz understands Yellow Pages'  banks, led by BNZ, have anointed Goldman after four investment banks pitched for the job late last month. Goldman advised Telecom on its sale of Yellow Pages to Hong Kong-based Unitas Capital, formerly CCMP Capital Asia, and Canada’s Ontario Teachers’ Pension Plan in March 2007. In a mammoth deal just before the global cheap credit bubble burst, the two private equity buyers paid between 13 and 14 times Yellow Pages' annual earnings before interest, tax, depreciation and amortisation (ebitda) for Yellow Pages. However, with the directories businesses earnings now in decline when they need to rise to prevent a banking covenant breach, the holders of Yellow Pages NZ$1.175 billion senior debt facility are in the drivers seat. This group includes lead banker the BNZ, ANZ, Westpac, Deutsche Bank, Credit Agricole Corporate and Investment Bank (formerly Calyon), Barclays, Macquarie Group, Allied Irish Banks and the Royal Bank of Scotland. The task for Goldman is likely to be to get back as much of the senior debt as possible given Yellow Pages may only be worth somewhere between NZ$700 million and NZ$1 billion in today's market. That leaves subordinated debt holders, who hold the balance of Yellow Pages' about NZ$1.72 billion of debt, facing complete loss as do its shareholders. The company's subordinated debt facilities include a NZ$315 million loan and a ‘Payment in Kind’ facility of NZ$228 million. Holders of the subordinated loans included Barclays Capital, ABN Amro and Deutsche Bank. They unsuccessfully tried to offload NZ$300 million of this through a retail bond issue in 2007 that was initially halved and then pulled. International private equity funds, perhaps including distressed asset buyers such as Cerberus Capital Management and CVC Capital Partners, and other directories business owners are seen as potential bidders. However the attempted sale comes with the directories industry globally under pressure from the internet, especially Google, for search and advertising business. Yellow Pages is not alone in the sector in battling high debts and Telstra's Sensis faces the threat of losing copyright on its phone books. This was first published this morning in our Daily Banking and Finance newsletter, which is for our paying subscribers. Find out more here.