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Seeing red over Yellow Pages

Fresh revelations about pay at Hibu show chairman received a £120,000 rise at troubled directories publisher

Bob Wigley was beaming as he rubbed shoulders with George Osborne at a private briefing hosted by the Chancellor in Westminster following last month’s autumn statement. The former chairman of investment bank Merrill Lynch in Europe was happy to show his face while he mixed with leading business figures.

His behaviour was in contrast to what had happened a day earlier in Reading’s Madejski Stadium. Then Mr Wigley and fellow directors refused to attend a special general meeting of Hibu, the collapsed publisher of directories business Yellow Pages, which he has chaired since 2009.

Angry shareholders wanted to quiz Mr Wigley after being left with nothing when shares in debt-laden hibu were suspended in July 2013 as lenders seized control in a £1.5bn debt-for-equity swap. This is a company that as recently as 2007 was worth £5bn and in the FTSE 100, before its debt burden and the rise of the internet devastated the business. Indeed it was a company that Mr Wigley himself helped to float in a £2bn listing in 2003, when he collected big fees as Merrill Lynch’s lead banker.

Mr Wigley expressed regret last July in a letter to shareholders. “As a significant investor in the company’s shares myself, I am as disappointed as you,” he wrote.

But his message was that the lenders were going to take over. He would stick around only for them to complete the restructuring, due this spring. There was nothing more he or fellow board members wanted to say about their actions. The dissident shareholders, who have formed the Hibu Shareholders Group, were furious and remain so – not least because the parent company, which they owned, may have collapsed yet its subsidiaries, now owned by the lenders, continue to trade.

The action group acknowledges Hibu was in a mess before Mr Wigley joined in 2009 when it was already crippled by a debt-fuelled acquisition spree. But they still have many questions, principally about whether the board did enough to protect its interests between October 2012, when Hibu said it was suspending loan repayments, and its collapse in July 2013.

During that period, even while the shares were being traded, vulture funds bought up the debt on the cheap, giving them a significant stake in the soon-to-be restructured business, unlike the loyal shareholders.

Finding out information has been difficult because Hibu did not publish an annual report for the year to March 2013. However, signs are now emerging that offer revealing details about soaring pay for senior management and the relationship with subsidiary companies.

The Independent has found accounts for Yellow Pages Limited, the most important UK subsidiary, which have just been filed to Companies House. These show “key management compensation” jumped 70 per cent to £6.5m in the year to March 2013.

Meanwhile, the action group has obtained a letter to Mr Wigley, dated October 2013, confirming he got a £120,000-a-year salary hike and £10,000 “car allowance” even after the company collapsed. He is getting the increase until the completion of the restructuring – on top of his existing salary of £264,000. It means his pay is the equivalent of almost £400,000 a year.

In addition, the job contracts for chief executive Mike Pocock and chief financial officer Tony Bates show their employment was changed from the parent to a subsidiary, Hibu (UK), in October 2012 – that crucial date nine months before the collapse. Barry Dearing, lawyer for the action group, described the move as “very odd” in the light of the fact that the subsidiary has kept trading.

Those close to hibu insisted all British employees, and not just the directors, had their employment changed to Hibu (UK) then. They admit the stock market was not informed but point out there was no obligation to do so. The hibu camp also insisted the 70 per cent pay increase was not on a “like-for-like” basis as the number of senior management changed. Mr Wigley deserved his rise because his role required significantly more work, adds a company source. He also chairs software retailer Expansys and headhunters Stonehaven Search and has a role at Cranfield School of Management, advising on corporate social responsibility.

Big reputations remain at stake. The solicitors Herbert Smith advised Mr Wigley and other board members, who include Richard Hooper, former deputy chairman of media regulator Ofcom. Now Hibu is in administration, Deloitte and the law firm Linklaters are picking up fees.

Yesterday, at a court hearing in the City, a date of 19 February was set for creditors – chiefly the lenders – to discuss the company’s valuable Spanish and US businesses. “Shareholders who have had their investment taken away from them aren’t being told anything,” claims Mr Dearing, who previously advised shareholders in collapsed doorstep lender Cattles and won £16m compensation. “We are still being kept in the dark.”

The fight is not over.

Walking fingers: from BT to bust

1966 General Post Office publishes first Yellow Pages in Brighton. Later becomes part of BT

2001 BT sells Yell to private-equity firms Apax Partners and Hicks, Muse, Tate and Furst

2003 Yell floats on stock market at 285p a share, valuing group at £2bn, plus £1.3bn of debt. Bob Wigley of Merrill Lynch is adviser

2004-7 Acquisition spree in Spain, Argentina and America. Net debt rises to £3.7bn

2007 Shares hit record 603p, valuing company at £5bn

2009 Net debt reaches £4.2bn. Bob Wigley named chairman. £660m rights issue

2011 Mike Pocock named chief executive, replacing veteran John Condron

Summer 2012 Announces £1.4bn annual loss. Rebrands from Yell to hibu

October 2012 Hibu warns it will suspend loan repayments and prepares for restructuring

March 2013 Breaches bank covenants at end of financial year

July 2013 Announces £2bn loss. Shares suspended

November 2013 Hibu put into administration. Subsidiary companies keep trading

Spring 2014 Lenders due to complete debt-for-equity restructuring