Bankers owed more than $1.7 billion will ponder a range of options
Yellow Pages Group chief executive Bruce Cotterill is playing down prospects of a sale as a powerful steering committee of its bankers ponders the future of the directory company.
The 28 bankers involved in its heavily leveraged 2007 buyout from Telecom are owed more than $1.7 billion.
But in 2010, Yellow Pages was estimated to be worth $900 million to $1.05 billion.
Cotterill said debt loading included $1.2 billion-$1.3 billion of senior secured debt and $300 million and $200 million in secondary and tertiary debt.
The website interest.co.nz this week predicted the overburdened directory was likely to be put on sale.
Cotterill - who is a director of YPG and represented the company at a meeting of the bankers' steering group this week - confirmed that a sale was an option.
Cotterill said that observers should not overemphasise the sale option as it was one of a range of possibilities.
Others included but were not limited to: further investment from shareholders or from a third party, a partial debt write-off or debt for equity swap.
He said there had been no assessment yet on the market for someone to buy the firm and stressed that Yellow Pages was trading profitably.
Issues from "a terrible debt structure" were independent from its strong performance as a company.
"Since December Yellow Pages Group has talking quite openly with bankers about the fact that our debt levels were probably unsustainable given the new environment," he told the Herald yesterday.
"We can operate with the interest on the senior debt."
Mark Clare of the boutique investment firm Woodward Partners - which is familiar with the firm - said it was too difficult to assess the relationship between the YPG board and the steering committee.
He said that if debt restructure led to a sale there would be potential interest from cashed up private equity parties but the value of the company was much less than in 2007. The sale price might only cover half of the debt and a sale might require a big writedown.
It came down to the question of how much the bankers were prepared to take a bath on their investment or if they preferred the option of restructuring debt so that YPG were able to pay them back.
The bankers would have a big say in this and on the best way forward.
Cotteril emphasised strong trading performance with advertising revenue down 2.1 per cent last year compared to 12 per cent for radio and television.
"We are still extremely profitable, down 8 per cent on our best ever year," he said.
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* Bankers who lent heavily to Yellow Pages Group are looking for ways to recover their money.
* They have formed a committee to decide over how to restructure Yellow Pages Group debts, which are more than the value of the company.
* Telecom sold Yellow Pages Group in 2007 for $2.24 billion.
* In a heavily leveraged deal Hong Kong based Unitas Capital and Ontario Teacher Pension Plan paid Telecom 14 times annual earnings. Similar businesses are now valued at six or seven times earnings.
* YPG now says the debt loading is unsustainable.
* 28 bankers owed $1.72 billion have formed a steering committee to decide how to handle the problem.
* Among the options is whether they should call on private equity owners to sell the firm.
* The committee led by the bank of New Zealand is made up of six banks, two of them New Zealand based.
