Although once considered a conservative investment, with the use of the ubiquitous yellow pages dwindling and its efforts to reinvent itself as a digital marketing company sputtering, Yellow Media Inc. (“Yellow”) sought to restructure approximately $2 billion of its debt by way of a plan of arrangement pursuant to the CBCA (the “Proposed Plan”).
In this matter, we organized and represented an ad hoc committee (the “Committee”) of the holders of Convertible Unsecured Subordinated Debentures (the “Debentures”), which included both retail and institutional investors. Many of the holders of the Debentures were retirees who had purchased them in order to achieve a predictable flow of future interest payments with the relative safety of a bond, as opposed to an equity investment.
Our clients felt aggrieved because they had made their purchases fairly recently as a perceived safe investment, and Yellow was now seeking to essentially wipe out nearly all of their investment in the context of a Proposed Plan where subordinated debtholders were not at the table.
In addition, the process put in place for voting on the Proposed Plan significantly diluted their influence by relegating the holders of Debentures to the same class as shareholders, while converting their debt to equity at a rate they considered below market value. While the process also permitted them to vote as debtholders by electing to “opt-out” of the shareholder class, this would result in the dispersion of their votes as well as a likely cram-down scenario where their votes would be overwhelmed by other groups of debtholders.
After a vigorous contestation, which included rallying as many negative votes as possible, opposing the claims and voting process as well as the fairness of the Proposed Plan, and successfully contesting an attempt by Yellow to have the approval of the Proposed Plan automatically constitute approval of any eventual CCAA Plan, we were able to achieve a very favourable negotiated settlement on behalf of the Committee. The settlement in favour of our clients included, amongst other terms, (i) the resumption of certain interest payments that had been stayed as a result of the initial order, (ii) the granting of rights to receive new debt instruments, (iii) the receipt of additional warrants, (iv) an adjustment to the conversion price for the new debt, and (v) the payment of all of the Committee’s legal and expert’s fees. This settlement highlighted FFMP’s ability to achieve excellent results in the face of significant challenges.
Yellow Media Inc. (Arrangement relatif à), 2012 QCCS 4180 (CanLII)
The Globe and Mail, "Yellow Media strikes deal to end debt-swap dispute"