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Yellow Media Inc. has announced:

it reached a settlement with the lenders under its senior unsecured credit facility who were opposing the Company’s proposed recapitalization (the “Recapitalization”). Pursuant to the settlement, such lenders agreed to notify the Québec Superior Court (the “Court”) that they do not object to the implementation of the Recapitalization and agreed to facilitate its implementation.

The Company has agreed to propose to the Court that the terms of the Recapitalization be amended such that:

• upon implementation of the Recapitalization, the Company will pay to the lenders, the holders of its existing medium term notes and the holders of its existing convertible unsecured subordinated debentures all accrued and unpaid interest up to but excluding the date of implementation of the Recapitalization, and pay to the lenders the $25 million amortization payment on the outstanding balance of the non-revolving tranche of the credit facility originally due on October 1, 2012;
• the lenders will receive $25 million additional principal amount of new senior secured notes pursuant to the Recapitalization;
• in exchange for the payment of the additional $25 million amortization amount on the non-revolving tranche of the credit facility and the issuance of the additional $25 million principal amount of new senior secured notes to the lenders upon implementation of the Recapitalization, the principal amount of the outstanding credit facility debt will be reduced by $58 million, from $369 million to $311 million, for purposes of calculating the pro rata distribution of the consideration under the Recapitalization;
• the holders of the existing convertible unsecured subordinated debentures will receive $5 million additional principal amount of new senior subordinated exchangeable debentures pursuant to the Recapitalization;
• the annual interest rate on the new senior secured notes will be increased from 9.00% to 9.25%;
• the mandatory redemption provisions in respect of the new senior secured notes will be amended to provide, notably, that:
  • o the Company will use an amount equivalent to 75% (up from 70%) of its consolidated excess cash flow (as determined pursuant to the indenture governing the new senior secured notes) for the immediately preceding two fiscal quarters, on a semi-annual basis on the last day of May and November of each year, commencing on May 31, 2013, to redeem the new senior secured notes at par on a pro rata basis;
  • o the Company will make minimum annual aggregate mandatory redemption payments thereunder of $100 million for the combined payments due on May 31, 2013 and November 30, 2013, $75 million for the combined payments due on May 31, 2014 and November 30, 2014, and $50 million for the combined payments due on May 31, 2015 and November 30, 2015; and
  • o for purposes of determining consolidated excess cash flow, deductions for capital expenditures and information systems/information technology (IS/IT) expenses will each be subject to an annual deduction limit of $50 million;
• the Board of Directors of New Yellow Media will be comprised of ten directors (instead of nine) and the lenders will have the right to nominate one member of the initial Board of Directors of New Yellow Media, who will also be a member of the initial audit committee of New Yellow Media.

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As a result of the settlement, the Recapitalization is now expected to be implemented and become effective on December 20, 2012, subject to a number of conditions, including the approval of the Toronto Stock Exchange and the receipt of the final approval from the Court in respect of the Recapitalization, which is no longer being contested by any party before the Court.
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As a result of the Recapitalization becoming effective, the Company will not redeem any existing cumulative redeemable first preferred shares, series 1 that have been or may be tendered for redemption by holders in accordance with the terms of such preferred shares beginning as of December 31, 2012, and will therefore not pay any retraction price nor any accrued and unpaid dividends in respect thereof. Pursuant to the Recapitalization, the holders of all of Yellow Media’s existing preferred shares, other than the preferred shares, series 7, will be entitled to receive the same consideration (as described above) in exchange for each preferred share and all related entitlements.
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In the course of negotiations with the lenders in connection with the Recapitalization, the Company disclosed confidential information to the lenders pursuant to signed confidentiality agreements.
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According to the 5-Year Plan, forecasted earnings before interest, taxes, depreciation and amortization (“EBITDA”) during the five-year period should be sufficient to enable the Company to meet its obligations and give effect to its announced business plan notwithstanding that those forecasts showed fiscal 2013 EBITDA being substantially lower than forecasted fiscal 2012 EBITDA.

The company has four series of preferred shares outstanding, YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. These shares will be wiped out in exchange for shares representing 6.5% of the outstanding common together with some warrants.

This entry was posted on Tuesday, December 11th, 2012 at 1:15 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.