UPDATE 1-Yell says review may dilute shareholder interests

Wed Jul 25, 2012 10:22am BST

(Adds analyst quote, details; updates share movement)

By Brenton Cordeiro

July 25 (Reuters) - Debt-laden phone directory publisher Yell Group Plc said it was considering options that may result in a dilution of shareholders' interests, as part of a capital structure review, sending its shares down by more than 50 percent.

Yell would likely look at a debt-for-equity swap, analysts said. "They don't explicitly mention debt for equity, but that's what it means," Panmure Gordon & Co analyst Alex Degroote said.

The company, which publishes paper phone books around the world, has been working to build on its digital offerings but continues to be weighed down by a massive load of debt.

Yell, which had a market value of about 40 million pounds ($62.11 million) as of Tuesday closing, said net debt stood at 2.18 billion pounds as of June 30.

"They're basically saying that the equity could be wiped out," Degroote said.

The stock was down 34 percent at 1.14 pence at 0920 GMT on Wednesday on the London Stock Exchange, with more than 100 million shares changing hands.

"The group intends to consult with its key stakeholders, including lenders and shareholders over the coming months in order to put in place an appropriate group capital structure within the current financial year," the company said.

Directory publishers like Yell and its Canadian counterpart Yellow Media Inc have struggled to stem the slide in their print businesses and pare huge debt loads, as more people turn to Internet-based giants like Google to find local listings.

Yellow Media said on Monday it plans to exchange C$1.8 billion of debt for senior secured notes, subordinated unsecured exchangeable debt, new common shares and cash to cut debt and extend debt maturity.

Yell reported a massive 1.42 billion pounds loss before tax for last year and appointed Goldman Sachs and Greenhill as advisers to assist it with a new capital structure.

For the first quarter ended June 30, Yell said revenue fell 15 percent to 331 million pounds and that the adverse revenue and margin trends it reported in May continued to impact financial performance. ($1 = 0.6441 British pounds) (Reporting by Brenton Cordeiro in Bangalore; Editing by Don Sebastian)