PrefBlog

Tim Kiladze of the Globe and Mail reports:

But there have been rumblings of anger from some creditor groups about the way the spoils are being divided, and the company’s bankers and convertible debenture holders – who own bonds that can be converted into common shares – escalated frustrations last week by separately hiring lawyers and going public with their grievances.
…
On Monday, the banking group, which is made up of the Big Six banks and Caisse Centrale Desjardins, and which is owed $369-million by Yellow Media, will appear in Quebec court to voice its arguments.
…
Banks and convertible debenture holders both argue they were treated unfairly by Yellow Media because they were not consulted before the restructuring plans were made public. The banks accuse the company of using “a divide and conquer strategy” by negotiating only with a small group of bondholders, and they want the process to start over.
…
At the moment, it is unclear how receptive the court will be to both groups’ complaints because their legal rights are murky. The debt restructuring has already been deemed to be fair by financial advisers BMO Nesbitt Burns and Canaccord Genuity.

But that hasn’t stopped the groups from putting forth their arguments. In a motion filed in Quebec court, the banking group, represented by McMillan LLP, states that “creditors are the parties with the primary economic interest in an insolvent entity, and they are, and must be, involved in shaping the terms of a plan that will govern any compromise or arrangement of their debt.”

The convertible debenture holders are also upset at “having been excluded completely from the consultative process” said lawyer Avram Fishman at Fishman Flanz Meland Paquin LLP, and they can’t understand why “they were not asked whether they agreed with [the proposed arrangement] or what provisions could be changed to induce them to accept it.”

The proposed reorganization has been reported on PrefBlog. I suspect that I might recommend a negative vote by preferred shareholders – who may well be able to vote separately as a class – on the grounds that the plan assumes forced conversion by preferreds into old common, which is then converted on harsh terms into new common.

In other words, the plan appears (appears! Pending my review of final documentation!) to be a worst-case scenario alread for the preferred shareholders … and why should they vote “Yes” if they’re not being paid to vote “Yes”?

YLO has four series of preferred shares outstanding: YLO.PR.A & YLO.PR.B, which are subject to forcible conversion into old common, and YLO.PR.C & YLO.PR.D, which are not.

This entry was posted on Monday, August 6th, 2012 at 12:50 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.