PrefBlog

Yellow Media Inc. has announced:

that, in connection with its proposed recapitalization, it has amended the plan of arrangement to be considered and voted upon by the Company’s debtholders and shareholders at the meetings scheduled to be held this coming Thursday, September 6, 2012.

The Board of Directors of Yellow Media has decided to amend the plan of arrangement pursuant to Section 6.3 thereof so that the Company’s existing convertible unsecured subordinated debentures will be exchanged, as part of the recapitalization, for an increased number of existing common shares, on the basis of 50 shares, up from 12.5 shares, for each $100 principal amount of existing subordinated debentures. This amendment is supported by the holders of the Company’s existing medium term notes that have executed support agreements in favour of the recapitalization. The revised exchange ratio is the same as the exchange ratio used to determine the consideration to be received pursuant to the recapitalization by holders of the Company’s existing preferred shares. The Board has made this decision after giving consideration to the numerous representations made to the Company regarding the recapitalization, in particular by holders of existing subordinated debentures. Yellow Media is of the view that the recapitalization, after giving effect to the amendment, is responsive to the comments which have been received and strikes a better balance between the interests of stakeholders having regard to available alternatives while recognizing the imperative of moving forward with the recapitalization in order to provide the Company with the necessary financial flexibility to pursue its ongoing business transformation.
…
The amendment does not affect the relative treatment of senior debtholders under the recapitalization. As such, in order to preserve the allocation to senior debtholders under the recapitalization and to account for the increased number of new common shares to be issued, the number of new common shares to be issued to senior debtholders pursuant to the recapitalization will increase from 21,295,090 to 23,062,947, the exercise price of the warrants will be reduced from $31.67 to $29.25, and the exchange price of the senior subordinated exchangeable debentures to be issued to senior debtholders pursuant to the recapitalization will be reduced from $21.95 to $20.27. The aggregate number of new common shares to be issued pursuant to the recapitalization will thus rise from 25,812,230 to 27,955,088.
…

So it used to be that preferred shareholders would be getting 1.8-million new common shares out of 25.8-million, or 7% of the company … now they’re getting 1.83-million out of 27.96-million, or 6.5%.

I have previously recommended that preferred shareholders should vote against the plan:

YLO has four series of preferred shares outstanding: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. I recommend that preferred shareholders vote against the plan, on the grounds that they are being treated as if they have all be forcibly converted into common at the YLO.PR.A / YLO.PR.B rates prior to the conversion of the old common into new securities. That’s reasonable for YLO.PR.A and YLO.PR.B, but not so much for YLO.PR.C and YLO.PR.D, which are not convertible by the company. And, even for the A & B holders – you’re not getting paid to vote yes, so why give it away? If the company wants a yes vote from you, they should provide a little sweetener; the offer that’s on the table is already a worst-case scenario.

This entry was posted on Tuesday, September 4th, 2012 at 3:18 pm 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.