Debt write-off, new board expected for heavily indebted Yellow Pages Group

By Gareth Vaughan

Brent Impey, the former CEO of TV3 owner MediaWorks and new RadioLive talkshow host, may join the board of Yellow Pages Group as part of a major revamp at the heavily indebted directories business.

The Australian Financial Review reports Impey's appointment will come as Yellow Pages' senior lenders, led by the BNZ, vote this week on a debt to debt plus equity swap and reveal a new board. This vote had been due to take place just before Christmas, as reported by interest.co.nz in December. 

Asked by interest.co.nz if he was set to join the Yellow Pages board, Impey said he couldn't confirm anything. The group of more than 30 banks is chaired by independent chairman and KordaMentha partner Brendon Gibson. He couldn't immediately be reached for comment.

The debt swap will see lenders crystalise massive losses. Senior lenders, who agreed to a debt standstill through most of 2010, face substantial losses on the at least NZ$1.2 billion they are owed with subordinated debt holders set to lose all of their more than NZ$500 million exposure.

Yellow Pages will be left with a stapled debt package incorporating NZ$500 million in senior loans and NZ$250 million in convertible notes, the AFR reported. The notes will be convertible into equity after the senior debt is refinanced.

A two-thirds majority of the debt by value needs to be voted in support of restructure proposals for them to pass. Voting is due to close late tomorrow. Westpac and ANZ, among the original senior debt holders, have reportedly sold their debt. Deutsche Bank is understood to have the biggest exposure of any one bank to Yellow Pages with both senior and subordinated debt.

Thomson Reuters reported that a slice of the senior loan sold for about 33 cents in the dollar last week.

A new board being assembled is expected to include Impey, Ebos Group, Skellerup Holdings and Ports of Auckland director Liz Coutts, Scott Pomeroy who is the president and CEO of US firm Local Insight Media, former Yellow Pages director Andrew Day, and Paul Wilson, who has recently worked with firmer Fairfax Media CEO and ex-All Blacks captain David Kirk to establish Bailador, a private equity fund that aims to invest in e-commerce.

The company's current directors are CEO Bruce Cotterill, David Tay Der Lin and Anurag Mathur.

According to the AFR, the new directors will receive a NZ$150,000 fee plus a substantial incentive should Yellow Pages be sold for more than NZ$1 billion. The debt restructure and new board comes after the banking syndicate decided against selling Yellow Pages last year after a Goldman Sachs run sales process attracted interest from potential buyers ranging from about NZ$400 million to about NZ$600 million.

Unitas Capital - formerly CCMP Capital Asia - and Teachers’ Private Capital, the private investment arm of the Ontario Teachers' Pension Plan, bought Yellow Pages from Telecom in March 2007 for NZ$2.24 billion in a leveraged buyout that included about NZ$1.5 billion of debt. Given the group's debt position, the shareholder stakes are effectively worthless.

Yellow Pages filed its annual accounts for the June 2010 year over the summer holidays. They show show a writedown of NZ$1.6 billion, made up of NZ$970 million of goodwill, and NZ$639 million of brand value. This leaves goodwill still on the books of NZ$320 million, and brand value still on the books of NZ$259 million.

The accounts also show negative net worth of NZ$1.2 billion. Earnings before interest and tax was stable at NZ$143 million versus NZ$140 million in the previous year. Secured interest bearing borrowings were NZ$1.8 billion.

Yellow Pages' bottom line loss blew out to NZ$1.4 billion from a loss of NZ$338.3 million in the June 2009 year.