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Yellow Media shareholders, debtholders OK restructuring plan

Yellow Media Inc. logo is shown at the company's quarterly results meeting in Montreal, Thursday, May 6, 2010.

Graham Hughes/THE CANADIAN PRESS

Yellow Media Inc. can continue its transformation into a digital company now that a majority of debtholders and shareholders have approved a controversial plan to reduce its $1.8-billion debt, the directories publisher said Thursday.

The Montreal company said it will put the debt restructuring plan in place by the end of this month, but added it's still subject to a number of conditions, including final approval by the Quebec Superior Court.

"The approval by the debtholders and shareholders represents a significant milestone towards the completion of the recapitalization," chief executive Marc Tellier said in a news release.

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"The recapitalization will substantially improve the financial flexibility of the company and allow the company to pursue its ongoing transformation in order to enhance long-term value for stakeholders."

Yellow Media owns and operates a number of properties and publications including Yellow Pages print directories, YellowPages.ca, Canada411.ca and RedFlagDeals.com.

A group of retail and institutional lenders to Yellow Media had said earlier this week that they would not support the amended plan to reduce the company's debt.

The lenders had said they wanted Yellow Media to withdraw the plan because it's unfair to convertible debentureholders, holders of bonds that can be converted into shares.

The group said Yellow Media's amended plan "would still be less than the value of the semi-annual interest payment due on October 1," to convertible debentureholders.

Yellow Media has said it has amended the resolution approving the recapitalization of its debt to authorize the company to implement the plan through the Companies' Creditors Arrangement Act – essentially seeking protection from its creditors – if the current effort "appears for any reason impracticable."

The company had first filed its restructuring plan under the Canada Business Corporations Act.

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Yellow Media said it amended the plan so that the company's existing convertible unsecured subordinated debentures will be exchanged for an increased number of existing common shares, on the basis of 50 shares, up from 12.5 shares, for each $100 principal amount of existing subordinated debentures.

The number of new common shares and warrants to be received by holders of existing subordinated debentures will increase to 500,000 new common shares from 125,000 and from 71,429 to 285,714 warrants.

Existing credit facility lenders and noteholders will share $750-million of senior secured notes, $100-million of subordinated unsecured debt, 82.5 per cent of new shares and $250-million of cash.

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