Yellow Media Inc T.YLO

well, let me enlighten you with some knowledge that may be accretive to your iq.

Insulting people doesn't make you look more intelligent. It just makes you look worse if you turn out to be wrong.

* the ratio that the banks keep eyeing hawkishly is 2.5 and to the extent that yellow is compliant with amended debt covenants, they are allowed to knock off 50% of the face value of the mtn debt in the open market ($700m) by repurchasing them at 50 cents on the dollar (because they're saving at least $300m in dividend payments). this is stirring quite a commotion among the mtn holders, as witnessed by the "i just want to be made whole again" campaign.

First, the $300 million isn't money in the bank. It's a payment that Yellow Media made in previous years and might or might not have been able to make this year. Yellow Media's revenue is declining, and the biggest unknown is how rapid that decline will be. Nobody know how much money Yellow Media will be able to dedicate to debt reduction this year. I hope it's $300 million or more, but I would not treat it as a sure thing.

Second, the bank lending agreement allows Yellow Media to spend $125 milliion buying back 2013 bonds before they come due under certain conditions. One of the key conditions is that they need to meet their (secret, known only by Yellow Media and the banks) revenue target. We don't know if they will be able to buy back debt at a discount under the current agreement. And even assuming they can do this, they are limited to spending $125 million. Any other debt payments beyond this $125 million must be to the banks at 100 cents on the dollar.

Also, if they can't negotiate a better agreement with the banks (I hope they can, but nobody knows if they will be able to or not), the fact that they will be limited to the two 2013 MTNs means that they won't be able to buy back much debt at anywhere near 50 cents on the dollar. Once they start buying these bonds, the price will rise. They will still get a discount, but nothing like 50%. (If they get the freedom to buy whichever MTNs they want, they will have more ability to buy debt without moving the market price strongly against them.)

The commotion among bond holders is not triggered by Yellow's (possible) ability to buy some debt from willing sellers on the open market at less than par. The commotion is triggered by (a) the fear that Yellow Media may effectively default and force debt holders to accept less than par, and (b) the desire of one investor who bought bonds at 50 cents to to create a situation in which he can quickly flip them for something much nearer 100 cents.

* the pesky little preferred a & b shareholders (which account for the little $399m tranche down below) are likely the banks as they will hedge the risks from their poor lending against the upside of yellow's improving capital structure.

You can't just create facts out of thin air. You have zero evidence that the banks are major holders of A and B. I think it is very unlikely for reasons that will become obvious. You are welcome to think they are (without evidence) just as I think they aren't (also without evidence), but you can't build an argument on this.

* since the banks never lose money, they allowed yellow to draw $239m against their line of credit so they can be paid off at full face value.

If banks never lost money, the world economy would be a lot better right now. The banks have explicitly prohibited Yellow Media from paying cash for the Preferred A shares. (Please read this last sentence again, because it's really important. It's also a good reason to doubt that the banks are big holders of Preferred A.)

* is this stuff beginning to sink in with you yet?

It sure is.