Yellow Media threatens creditor protection if recapitalization voted down

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Yellow Media threatens creditor protection if recapitalization voted down

MONTREAL - Yellow Media Inc. is threatening to reduce almost $2 billion of debt through creditor protection if a recapitalization plan is voted down at a special meeting Sept. 6.

The Montreal-based directory publisher said it has amended the resolution approving the recapitalization to authorize the company to implement the plan through the Companies' Creditors Arrangement Act if the current effort "appears for any reason impracticable."

Yellow (TSX:YLO) said last week it would have to pursue other "less favourable" options but didn't elaborate what they would be.

The company says the board of directors has unanimously determined that the recapitalization plan is in the best interests of Yellow Media.

A group of lenders has filed a motion with the Superior Court of Quebec to challenge the company's proposed plan to swap debt for equity.

The group, representing holders of 6.25 per cent convertible unsecured subordinated debentures, represents numerous retail and institutional investors.

It wants Yellow Media to withdraw the proposed plan of arrangement, which it says is unfair to the group, and has said it will vote against the proposal.

Yellow Media has announced a plan to cut its debt to $850 million from about $1.8 billion and has said it will use credit facilities, debentures and cash in the recapitalization transaction.

McMillan LLP, counsel for another group of lenders that includes major banks, has said it would be best for the company to withdraw its proposed restructuring plan under the Canada Business Corporations Act and instead enter further talks with stakeholders.

The Toronto-based law firm represents Canada's Big Six banks — the Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank, Bank of Nova Scotia, Royal Bank and Toronto-Dominion — plus the Caisse Centrale Desjardins. They said they were owed $369 million plus interest by Yellow Media as of last Sept. 28.

Under Yellow's plan, the banks would receive shares, bonds and cash in exchange for debt.

Organizations: Yellow Media, Media, TSX Superior Court Big Six Bank of Montreal Canadian Imperial Bank of Commerce National Bank Bank of Nova Scotia Toronto-Dominion Caisse Centrale Desjardins

Geographic location: MONTREAL, Canada, Quebec

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