Debt accord set to ease European Directories deal

£1.7bn restructuring will see banks write-off 80 per cent of what phone book publisher owes
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The Independent Online

Creditors are putting the finishing touches to a €2bn (£1.7bn) restructuring of publishing company European Directories in a deal which will see 80 per sent of debt written off.

The company, the pan-continental equivalent of Yellow Pages, is expected to confirm by the end of this month that it has agreed with its creditor committee to carry out a "pre-pack" administration process. This controversial process involves lining up a buyer, which could be existing management, and then being placed in administration only to be bought out free of some or all of its debts. As part of the agreement, a new vehicle will be set up and the assets of European Directories will be transferred.



The senior lenders consortium which has almost 20 parties and is led by the Royal Bank of Scotland, which inherited its stake in the takeover of ABN Amro in 2007, and Lloyds Banking Group, is owed around €400m. It will take a partial debt-for-equity stake in the new vehicle. It will also further write down the outstanding debt which will be held in the new vehicle.



The junior creditors and the lead financier, Macquarie Capital, have agreed to write off €1.6bn of the debt. They will not hold any equity or debt position in the reorganised company. The accountancy firm PricewaterhouseCoopers is thought to have been lined up to act as administrator and implement the pre-pack deal.



European Directories, which is advised by lawyer Kirkland & Ellis, will continue to operate as normal during the implementation of the restructuring, which was originally due to have been completed by June.



The company was founded in Amsterdam and was taken over in a €1.8bn buy-out in 2005 by Macquarie Capital, part of the Macquarie Group, which then purchased other directory businesses across Europe. Today, European Directories has operations in Finland, Denmark, Austria, Sweden, the Czech Republic, Slovakia, Poland and Gibraltar. It employs 4,750 people and has more than 700,000 customers.



It is not an integrated brand business, with the day-to-day operations conducted at a country level by the various operating companies running under different names. Information is provided via print, online, telephone and mobile technology. Key initiatives are co-ordinated from the head office in London.



The restructuring has been agreed after a lengthy and complicated negotiation process, part of which was determining whether to adopt the Dutch or English pre-pack process. But as the company's "centre of main interest" was defined as being in the UK the creditor committee has decided to use the UK's more flexible pre-pack process.



Finalisation of the restructuring will be good news for the company which is operating in an increasingly competitive marketplace. Directory service publishers are facing challenges from falling advertising revenue, online competition and adapting their businesses to changing consumer behaviour. Many directory services groups also amassed sizeable debt before the credit crunch hit. In the UK, Yell Group, publisher of the Yellow Pages, carried out a £660m rights issue and secured an agreement from its lenders to extend debt repayments to 2014.



All European Directories parties declined to comment.

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