RE: IR contactI was beginning to fear that I was the only one who actually spoke to IR on this board. They can certainly dispel some myths for you and provide some good insight into recent moves if you call. They are not going to divulge unannounced future plans since that would violate ethics/laws. However, they can definitely put things in perspective. IR calls the notion of bankruptcy far-fetched. They can elaborate to quite an extent on debt reduction strategy to date, on the debt reduction plans for 2011-2012, on the possibilities of resuming guidance, on the implications of the new lending agreement with banks, and on the popular fear that decline of print revenues is is accelerating.
Some notes:
- Fears of bankruptcy are far-fetched
- Series A will likely not bought back @ $25 next Dec -- they will either be converted to commons or will be extended beyond 2012 at the option of holders.
- Company does not control YLWPF listing at all. This was created largely by and at the behest of US investors and hedge funds. YLO does not pay for the listing or control it. That this became the back door for a huge short position is not something the company could control.
- The non-revolving line of bank debt does not necessarily need to be paid off ahead of 2013 MTNs which can be bought back at 50% savings under current conditions. 125 M in the line of credit remains available for these MTNs. The line of credit need not be paid off in full by 2013. It sounds like 125 M can be left in the revolving line moving forward IF this proves necessary.
- Banks were nowhere near calling in debt. They did have concerns about any spending on share buy backs ahead of more senior debt and they will be watching closely to ensure that the company is executing to their own projections (supplied in Sept) going forward.
- YLO is traditionally 80% held by dividend seeking retail investors. Many of these are seniors who were in this seeking stability and dividend-based income. This demographic is, unfortunately, fairly easy for hedge funds and market sharks to prey on.
- There is no reason to expect a dramatic or accelerated rate of print revenue decline this quarter. In fact, accounting practices and subscription payments tend to spread seasonal effects over the quarters in a year already so that Q3 revenue should be in line with past and Q4 should start to reflect the progress being made with 360 solutions. Q3 and onwards should obviously see more free cash flow since there is no longer a dividend on commons and since financing costs are lower with a billion or so in debt reduction this YTD.
- There is no evidence that the rate of print revenue is accelerating and it is the feeling of the company that print will reach a steady state and not decline at 10% per year indefinitely. (This makes a lot of sense since there is a significant base of more elderly citizens who still prefer printed media and will be around for many years to come).
- The rate of online growth averaged over several years is 25%. It's been higher in the past 2 years suggesting some initiatives have been working.
- The company will focus on 2013 MTNs and bank debt over 2012. To do any more share buy backs, they would need to renegotiate their line of credit agreement with the banks. With higher-than-expected earnings, anything is possible but the general feel is that 2013 senior debt and bank debt comes first.
- The company feels that there is every reason to expect that the 250 M revolving credit facility will be renegotiated part 2013
- Asked why the company is providing guidance to the banks but not investors, longer guidance timeframes were cited and the company withheld quarterly guidance primarily because it was hard to project very short timeframes when in the midst of larger business transitions. IR felt there was a reasonable chance of resuming guidance sooner than many might be expecting.
- Recovery is not expected to be instantaneous and investors need to look at a somewhat longer timeframes to rebuild share value. There company recognizes there is currently a lot of trading activity and manipulation around the stock. They understand the challenges posed by the squaring off of retail investors with organized hedge funds and advanced traders. The company feels that the best way to address this is to work, in a focused way, on the core business, the online transition, and better management of the balance sheet
Mark