Yellow Media shakes up board, cancels preferred shares dividend to pay down debt

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The logo of Yellow Media Inc. formerly Yellow Pages, is shown on March 22, 2010 in Montreal. THE CANADIAN PRESS/Ryan Remiorz

MONTREAL - Yellow Media Inc. announced a shakeup in its board of directors Thursday, bringing in experts in restructuring and corporate finance as it struggles to pay down heavy debt and transition to a digital company.

"These new members collectively bring extensive knowledge of corporate finance and corporate development, as well as strategy within the technology media and telecom industries," chief executive Marc Tellier told a conference call Thursday.

The three new directors are David Leith, chairman of MTS Allstream and Manitoba Telecom Services; Bruce Robertson, who serves as principal at Grandview Capital, and Craig Forman who serves as executive chairman of Appia Inc, a provider of independent mobile applications.

Robertson, a former senior managing partner at Brookfield Asset Management Inc., was appointed by AbitibiBowater in 2009 as its chief restructuring officer to help the troubled forestry concern work its way out of bankruptcy protection.

The publisher of the Yellow Pages print and online directories also announced Thursday that it was cancelling the dividend on its preferred shares. Yellow Media had already cancelled the dividend on common shares last September to help improve its financial position and pay down debt.

Yellow Media said it reduced its total debt by about $800 million in 2011 with the help of the proceeds from its sale of Trader Corp., home of AutoTrader magazine. But it still has about $1.5 billion of net debt.

Yellow Media (TSX:YLO) said it has been evaluating alternatives — including issuing debt, equity, securities or other transactions — to refinance debt that matures this year and beyond.

"The board of directors of Yellow Media has established a committee of independent directors to serve as the financing committee of the board that will oversee this process with the objective of completing any transaction or transactions during the current fiscal year," Tellier told analysts.

"At this time, the board of directors has decided to suspend the dividends on the outstanding series of preferred shares," Yellow Media said after reporting it earned $109.7 million from operations in its fourth quarter.

Tellier said digital services accounted for about 30 per cent of revenues in 2011.

"However, while our digital growth is strong, it is not yet sufficient to offset the continued pressure on our traditional print franchise. We recognize the transition will take time."

Shares in Yellow Media were down two cents, or 10.3 per cent, to 17.5 cents in afternoon trading on the Toronto Stock Exchange.

RBC Capital Markets analyst Drew McReynolds said the suspension of the preferred share dividends will give Yellow Media greater liquidity and the ability to accelerate progress to pay down its debt obligations.

McReynolds said Yellow Media paid down $35 million of commercial paper in November and reduced its credit facility balance by $61 million to $205 million, calling it "good progress" in a research note.

The Montreal company also has said it will gradually eliminate its Canpages print directory business, cutting some jobs, but will keep the online directories.

In its financial results, Yellow Media reported it earned $109.7 million from operations compared with $73.8 million for the same quarter in 2010.

Revenues were $313.3 million, falling from $345.4 million, mainly due to lower revenues from its print and U.S. operations.

For the full year, the company booked a net loss of $2.83 billion, reflecting a goodwill impairment charge of $2.9 billion booked in the third quarter.

As well as publishing print and online directories, Yellow Media builds websites for small- and medium-sized businesses and provides such services as email marketing and video production and is focusing on digital services to attract more advertisers.

"We are not yet able to offset the print declines with the sale of new online products," Tellier said.