Yell Gets a Boost From Lender Deal

Heavily leveraged Yell Group has earned some breathing room from a deal with its lenders announced yesterday. Yell announced that it has reached terms with the “overwhelming majority of lenders” to increase the headroom on its debt. Without such concessions, Yell was at risk of violating the covenants, which require the company to stay within a determined debt to EBITDA ratio.

Yell’s current debt is roughly 2.6 billion GBP. For the 2011 financial year (ended March 31), Yell reported EBITDA of GBP514 million on revenues of GBP1,878 million, a 27 percent margin.

Yell is currently in the midst of a significant strategic transformation under the leadership of Mike Pocock, who took over as CEO on Jan. 1, 2011. The company is shifting from being largely print based to a multi-product, digital focus. Yell has projected it will generate 75 percent of its total revenues from digital sources by 2015.

In July, in advance of its new strategy announcement, Yell announced a flurry of deals, including one with Microsoft to resell its Office 365 cloud based solutions, and acquisitions, inlcuding Znode, an e-commerce software company. These deals demonstrated Yell’s commitment to a wide expansion of its product set.

In a statement, Yell CFO Tony Bates said, “We are pleased that, with this decision, lenders have strongly endorsed our new  strategy and have given the Group additional freedom to carry out its transformation program.”

The negotiations with the lenders apparently were not easy, and were extended on Dec. 7. And on Dec. 9, news reports suggested lenders were resisting the directory company’s request for loan amendments, which prompted Yell to make changes to its request.

Yell has seen significant senior leadership turnover under Pocock. Most recently, Yellowbook CEO Joe Walsh and Yell Group online head Mark Canon have left the company.

Yell’s shares rallied briefly on Monday after the deal was announced before declining to end the day down 12 percent. On Tuesday, Yell’s shares were trading at 5.16 pence. Over the past six months, Yell’s shares have traded in a range of 3.35 p at the low end on Nov. to a peak of 11.25 p on July 13. Yell’s historical high was more than 600 p back in 2007.

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