Yell fails to agree with creditors

graeme at 7:58 a.m. Tue 27 Oct 2009

Yell has, worryingly, been forced to extend its deadline for lenders to agree to its proposals for re-financing.

This follows an earlier extension and suggests that lenders are reluctant to agree to Yell’s terms. Yell also needs to raise £500m in equity, which will not be easy, so a rights issue is very likely as the company will need to pressure shareholders into providing this much money.

A quick look at the last annual report or the last quarterly numbers shows that the company is heavily geared: in fact it is almost entirely funded by debt.

Yell remains profitable ans cash generative, so it should be able to reach an agreement. It is not in the creditors interests to push the company into insolvency, but it looks likely that they believe that they can reach a better agreement (at the expense of the shareholders) than is currently being offered.

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