Yellow's owners approve plan to replace debt with securities in new company

Yellow pages directory. Photo:Ross Setford.

Creditors of NZ Directories Holdings, the owner of the Yellow directories service, have voted overwhelmingly in favour of a new capital structure, that will see them holding securities in a new company in return for relinquishing claims to $385 million of debt.

The new company Yellow Holdings Limited will incorporate New Zealand Directories IP Limited, Yellow Pages Group Limited and its subsidiary, Finda Limited, they said in a statement.

"The board, management and shareholders are very pleased to make these changes as they effectively unshackle the business to be more nimble, responsive and future focused," said chairman Brett Chenoweth.

"We now have a simpler corporate structure with 12 shareholders and a conservative level of commercial debt."

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The company's leverage will be about two times earnings before interest, tax, depreciation and amortisation.

Executives won't answer questions or be available for interviews to discuss the changes to the directories business, according to the statement, issued by PR firm Porter Novelli and distributed selectively to media.

Auckland-based NZ Directories has gross assets of $182.5 million and there was "no realistic prospect that the company can refinance the existing debt facilities with a third-party financier" when they come due on August 31, the company said in the notice for yesterday's meeting.

The creditors will be issued with shares and notes in Yellow Holdings, a company structured to meet new 'thin capitalisation rules' coming into effect from July 1.The new company incorporated on April 21 is still held in the name of a single shareholder, Chenoweth.

The new structure is the second such overhaul in four years. Bankers to the company formerly known as Yellow Pages Group wrote off $1.05 billion of debt when they took control of the business in 2011.

They were issued 250 million shares held via Yellow Pages Equity Trust and $500 million of senior notes, wiping out the equity of the original owners, Hong Kong-based Unitas Capital and Canada's Ontario Teachers' Pension Plan, who bought Yellow Pages from Telecom for $2.24 billion in 2007 in a leveraged buy-out.

More than 2 million New Zealanders use one of Yellow's products each week, according to its website.

"Yellow is poised for the next stage in its development including a continuation of our digital transformation," chief executive Michael Boersen said, according to the statement.

"We remain one of New Zealand's largest digital companies continuing to deliver more than 36 percent of total revenue per year in digital and growing."