Lenders Seek Help as Truvo Considers Debt Options

LONDON (Reuters) – Lenders to directories firm Truvo are looking to appoint an adviser, two sources close to the situation said on Thursday, after the company appointed a financial adviser earlier this week.

Truvo, a poster child for the debt-fuelled private equity boom, was formerly known as VNU World Directories and was the first European leveraged buyout to feature US-style “covenant lite” loans, at the top of the frothy debt markets in mid 2007.

Private-equity owned Truvo is now weighed down by about 1.2 billion euros ($1.69 billion) of debt and appointed Houlihan Lokey as financial adviser to help it consider “various business and capital structure alternatives” this week.

In response, lenders to the company are also seeking help to represent their interests in any discussions as the company considers its options, the source said.

“There is not a formal process, it’s one where people are circling around and looking at who to go to for advice,” said an investor source.

Options open to the company include a restructuring of its debt or a debt buyback, a suggestion made by Truvo Chief Executive Donat Retif in April.

Houlihan Lokey’s appointment may not lead to any specific transactions or outcomes, Truvo said.

CASH AT HAND

The company had about 250 million euros in cash on its balance sheet at the end of March after selling its Dutch directories business Gouden Gids.

The discussion is focussing around the best use of this cash. Management and Truvo’s private equity owners are considering options that include acquisitions and repaying debt, the investor source said.

“Do you use it (the cash) for upside and growth or do you use it to pay down debt or tender debt in the secondary market?” he added.

Truvo’s finances have been hit by weak trading conditions and the transition of customers to the internet.

In May Standard & Poor’s downgraded Truvo’s ratings to CCC+ with a negative outlook due to weak finances.

“Truvo’s capital structure is likely to become unsustainable in the near term, especially in light of the current adverse trading environment,” S&P said.

S&P rates Truvo’s bonds — totalling 395 million euros and $200 million and due in 2014 — two notches lower than the company because the bonds are ranked lower in the capital structure than its loans, which total about 1 billion euros.

Private equity firms Apax Partners and Cinven bought Truvo, previously known as VNU World Directories, in 2004 for about 2 billion euros. They refinanced the company on more advantageous terms in April 2007, at the height of the credit boom.

(Reporting by Tom Freke and Zaida Espana, additional reporting by Tessa Walsh; Editing by Kenneth Barry)