Yellow to turn page with a fresh start

DEBT-LADENED directories business Yellow will attempt another fresh start with the holding company that own the business set to be put into receivership or liquidation in June.

It is not the end for Yellow, which will be transferred to a new business free of much of the debt the business can’t repay.

NZ Directories Holdings, which trades as Yellow, yesterday reported an annual loss of $46 million for the year to June 30 after another big write-down of the value of the print and online directories business. Yellow’s revenues for the year fell 12 per cent to $158m.

The company, which produces the Yellow and White pages, was sold by Telecom to a Canadian-led private equity consortium for $2.2b in a highly-leveraged sale in 2007.

But it soon emerged the private equity firms had paid far too much for the business as consumers increasingly turned to internet search engines such as Google, rather than print directories, to track down and contact the businesses that form its mainstay of advertisers.

A consortium of bank lenders, led by Bank of New Zealand, took control of the company in 2011 as part of a deal that saw the banks write-off $1b of the $1.8b loans that had been used to finance the original purchase of the business from Telecom.

However, it now appears a bigger write-off was needed.

NZ Directories Holdings has $389m of debt that is due to be repaid in August and said in its accounts that it had ‘‘no realistic ability’’ to refinance those loans at their carrying value, meaning much of that debt would need to be written off as well.

The company said in its accounts that its lenders had opted for an ‘‘orderly restructure’’ of Yellow, given that they were also now the owners of the business.

An ‘‘implementation deed’’ has been drafted that would see a new company buy shares in its trading subsidiaries, NZ Directories IP and Yellow Pages Group, on June 30, NZ Directories Holdings revealed in its accounts.

The new company would be owned by the business’ existing creditors in proportion to their lendings and NZ Directories Holdings would then be put into receivership or liquidation, it said.

Yellow chief executive Michael Boersen nevertheless described Yellow’s operating performance last year as strong, saying the business had a ‘‘trading profit’’ of $48m and generated $61m in cash from operating activities. That trading profit was down from $56.1m last year.

The decline in its revenues was entirely due to its print business, with the contribution of its digital directories business stable at $46m.