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Yellow Media Inc T.YLO



TSX:YLO - Post by User

Bullboard Posts
Comment by DoubleIndemnityon Dec 11, 2012 7:53pm
163 Views
Post# 20716199

RE: RE: the banks might not dump their new shares

RE: RE: the banks might not dump their new shares

Double, what is your calculation of fair value on the preferred shares?  

 

They are worth a bit less than 12.5 times whatever the common shares are worth, because of the lack of liquidity. 

 

Beyond that, this is a difficult stock to value. The company makes lots of money, but the revenue is declining at 17% per year. Even after the recap, it will have $907.5 million of debt, management will be forced to spend most of their free cash flow buying back senior debt at par, and they will not be allowed to pay any common shares dividends until the new debt is repaid in full.

 

The interest rates on the new debt are fairly high, but they will pay this rate on a much smaller total debt load. I did a quick calculation, and it looks like they are paying $97 million a year now (including convertible debentures but not including preferred share dividends), and will pay $83 million a year after the recap. The recap doesn't save them much on interest, but it does save them a bit and covering their interest payments has never been a problem for this company.

 

This is a very speculative investment. If you have the stomach for that, you might end up making some money.

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