LONDON (Reuters) – Debt-laden British yellow pages publisher Yell’s (YELL.L) lenders are inching towards a crucial loan amendment that will allow its planned 500 million pounds equity issue to go ahead, banking sources said on Friday.
Lenders have until Friday to agree to a set of requests that will extend the maturity on Yell’s 4 billion pounds debt and amend covenants to allow the equity issue to proceed in return for partial repayment and increased interest margins.
“There will be no equity issue unless the loan is extended,” a banker close to the deal said.
The process requires consent from 95 percent of Yell’s 200-plus lenders, which has been an uphill struggle as some investors are unconvinced about the company’s long-term prospects and have tried to exit the loan.
The majority of lenders are viewing the request positively, bankers said, but some investors have doubts over Yell’s future as the firm moves from paper to online publishing while battling the effects of the downturn as businesses cut advertising costs.
Co-ordinators Deutsche Bank, HSBC and JP Morgan have stressed that there is no option for committed lenders but to support the loan amendment, which is expected to be passed.
“There is no magic get out of jail free card, we’d all like to get out, no-one wants to be a lender to them (Yell) now,” the banker close to the deal said. The equity issue requires a statement signed off by Yell’s accountants that the company has sufficient working capital to meet repayments in the next 18 months.
Gaining 95 percent consent from lenders has proved difficult as only investors that are unable to extend the loan have been accommodated in the abstaining 5 percent.
These include Icelandic banks that are being run by administrators and are only interested in repayment and CLOs that are outside their reinvestment period.
The amendment requires the consent of all other lenders, including banks that have placed the asset in ‘bad banks’ and banks that have either exited leveraged finance or have returned to domestic lending.
“The vast majority of lenders are processing this positively but some hurdles have been inevitable. We don’t have ages, the equity window could close and we’ve had to put pressure on people,” a second banker said.
Investors are however already committed to the loan and it is in their interest to agree to the amendment in order to be repaid quickly via the equity issue, which will reduce their exposure by around 13 percent, several bankers said.
“If we don’t get the equity roadshow on the road, we’ll miss this year and maybe the opportunity to raise equity,” the second banker close to the deal said.
The only option for investors seeking to exit Yell’s loan is to sell the paper at a 20-point loss in the European secondary trading market. Yell’s loan is quoted at 80-81 percent of face value, according to Thomson Reuters LPC.
Loan traders reported on Friday that there had been relatively little trading activity in the name other than some sales of the A loan by hedge funds.
(Reporting by Tessa Walsh and Zaida Espana)