UPDATE 2-Yell sets last debt-deal deadline, court looms
* Yell sets final deadline for lender responses
* Gained 90 pct approvals so far
* Will seek court approval if cannot reach 95 pct
* Shares drop 3 pct; down 20 pct since Monday (Adds detail, background)
By Tom Freke and Zaida Espana
LONDON, Oct 29 (Reuters) - A 500 million pound ($822.2 million) rights issue for British directories company Yell YELL.L may be delayed until 2010 if Yell has to go to court to force lenders to agree a refinancing package.
Yell said on Thursday it had given lenders an extra day to sign up to amendments to its 3.9 billion pound bank loan, and may otherwise begin court proceedings to clinch a deal via a scheme of arrangement, which would take several weeks to arrange.
"Most probably we will go down the scheme of arrangement route and we won't be able to do a capital raising until 2010," a banker close to the deal said.
Simon Whittington, an analyst at UBS, said in a note the lender approval process could run into the new year, delaying the equity issuance.
About 90 percent of lenders by value supported the proposals, Yell said, short of the 95 percent required.
The extension, to 1700 GMT on Thursday, is the third Yell has offered its lenders, who need to approve changes to the loan so the company can issue shares and reduce its debt.
Shares in Yell, battling an advertising slump and a structural shift from print to online publishing, have fallen more than 20 percent this week, and at 1141 GMT were trading at 45 pence, almost 3 percent lower than the opening price.
Under a scheme, which would need to be approved by a London judge, lenders would be asked to vote again but the company would require approvals from only 50 percent by number and 75 percent by value of those that vote.
"We are now very near the point where the board may have to draw a line under the current process and move to a scheme of arrangement," John Davis, chief financial officer of Yell, said in a statement.
Yell would also have to seek a loan waiver to avoid an event of default, several bankers said.
Debt-laden listed companies, such as Ladbrokes (LAD.L) and Barratt Developments (BDEV.L), have sought hundreds of millions from equity investors in recent weeks. However, there are doubts about how long the flow of money will last. [ID:nLN606717]
Yell has a large group of creditors, comprising about 300 different banks and funds.
Some funds have rules that prevent them from recommitting capital, meaning they cannot agree certain amendments to loan terms.
Yell said on Thursday about 3 percent of its lenders could not agree to the proposed loan changes.
A scheme of arrangement is one way Yell can overcome these "hold outs", restructuring experts say.
"Schemes are a well established and powerful restructuring tool," said Richard Tett, a restructuring partner at Freshfields Bruckhaus Deringer. "The downside is that the process involves court hearings and lengthy documents, so it typically takes two to three months and can be quite expensive."
"Where there is a diverse lending group it can be difficult to corral creditors into a deal," said Phil Bowers, a restructuring partner at accountancy firm Deloitte.
Bowers said options such as a scheme of arrangement -- or, in more extreme circumstances, a company voluntary arrangement or pre-pack administration, -- can be used to encourage lenders to back a deal.
"A consensual solution is the aim but a robust 'plan B' can be useful to help such a deal come about," he said. ($1=.6107 Pound) (Editing by Rupert Winchester)
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