Yellow Media Inc T.YLO

Hi Glen,

Taking out the full revolver gives them flexibility and negotiating power with the banks.   It gives them the flexibility to pay back both senior MTN and senior bank debt with equal priority.   It makes it possible to pursue plans to buy back MTN debt below par (up to $125M allowed under banking agreement).   It gives them operating cash.   Those, I think are the primary reasons the revolver has been drawn.

Re delay of the pref A conversion -- I don't think this is an indication that they will allow the A's to mature but simply a matter of wanting conversion to be part of a larger strategy.  Hopefully it is about trying to preserve investor value across the whole gamut of the capital structure.   It does seem a bit more likely that they are going to make some sort of offer on the pref A's rather than just convert because they are letting dividends accrue.   There may be some use of the pref A's as a bargaining chip with the banks and bondholders since they could technically allow the A's to mature and then force CCAA with much less cash on hand.   Given that that the A's are junior to bank, MTN, and debenture debt instruments, prioritizing in this way would likely just immerse the company in lengthy legal wrangling and serve nobody.    I think a more likely and constructive way to pressure the banks into renewal is to work a deal with the 2013 bondholders to buy them out with the $125 M the company is allowed to spend.   This pressures the banks into renewal but also paves the way to a non-CCAA based recovery where the banks would likely be getting all their money back, albeit over 2-3 years instead of right away.

Mark