Yellow Media has been advised that its lenders do not support the Montreal directories publisher’s plan to cut its $1.8-billion debt and want it withdrawn.
Law firm McMillan, counsel for the company’s lenders, said Wednesday the lenders, who weren’t specified, are owed a principal amount of $369 million by Yellow Media as of Sept. 28, 2011.
Yellow Media has announced a plan to cut its debt to $850 million from about $1.8 billion as the struggling company continues its transition to an online company. It has said it will use credit facilities, debentures and cash in the recapitalization transaction.
But McMillan said the lenders don’t believe the Canada Business Corporations Act plan of arrangement proposed by Yellow Media in July is in their best interests, the best interests of the stakeholders or the company.
“The company put forward the proposed CBCA plan without notice to or prior consultation with the lenders or most of its other stakeholders,” McMillan said in a news release.
“The lenders have invited the company to withdraw the proposed CBCA plan forthwith and to engage in a more open and transparent consultation process with its stakeholders to see if an acceptable plan can be achieved.”
The lenders intend to bring a motion on Aug. 6 to protect their legal rights in the reorganization proceeding initiated by Yellow Media under the CBCA.
In May, rating agency DBRS downgraded Yellow Media to CCC from a low B, saying the decline in its print revenues was continuing and warned of possible further downgrades.
The company recently reported a first-quarter loss of $2.9 billion and wrote down the value of its assets by about $3 billion.
Like many companies in the communications and publishing sector, Yellow Pages has been hit hard by changes in consumer behaviour as Internet services dominate the information world.
Yellow Media has been transitioning to an Internet company for the last few years.
