S&P Downgrades YLO Debt; Preferreds Downgraded to "D"

Standard & Poor’s has announced:

  • The prospect of near-term debt restructuring at Montreal-based Yellow Media Inc. has increased, in our opinion.
  • As a result, we are lowering our long-term corporate rating on Yellow Media to ‘CCC’ from ‘B-‘.
  • We are also lowering our issue-level rating on the company’s senior debt to ‘CCC’ from ‘B-‘ and lowering our rating on the subordinated debt to ‘CC’ from ‘CCC’; the recovery ratings on these debt obligations are unchanged.
  • Finally, we are keeping all the ratings on Yellow Media on CreditWatch, where they had been placed with negative implications Dec. 5, 2011.
  • The CreditWatch listing reflects our concern about the increased likelihood of near-term debt restructure, which is aimed at aligning the company’s capital structure to deteriorating operations as well as addressing the refinancing of sizable debt maturities in 2013 and beyond.

At the same time, Standard & Poor’s lowered its issue-level rating on the company’s senior unsecured debt to ‘CCC’ (the same as the corporate credit rating on Yellow Media) from ‘B-‘. The recovery rating on the debt is unchanged at ‘4’, indicating our expectation of average (30%-50%) recovery in the event of a default. Standard & Poor’s also lowered its issue-level rating on Yellow Media’s subordinated debt to ‘CC’ (two notches below the corporate credit rating on the company) from ‘CCC’. The recovery rating on this debt is unchanged at ‘6’, indicating our expectation of negligible (0%-10%) recovery in a default situation.

In addition, we lowered the ratings on the company’s preferred shares outstanding to ‘D’ (default) from ‘C’, owing to the nonpayment of dividends on these securities when due.

“The downgrade primarily reflects Yellow Media’s heightened risk of a near-term debt restructure given the significant refinancing risk for its debt maturities in 2013 and beyond,” said Standard & Poor’s credit analyst Madhav Hari. “The downgrade also reflects our view that the company’s current capital structure is unsustainable against the backdrop of deteriorating revenue and cash flow trends,” Mr. Hari added.

YLO has four series of preferred shares outstanding: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D.

One Response to “S&P Downgrades YLO Debt; Preferreds Downgraded to "D"”

  1. […] issues were last mentioned on PrefBlog when S&P downgraded debt to CCC; preferreds to D. These issues are all tracked by HIMIPref™ but are assigned to the Scraps index on credit […]

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