Yell, the Ftse-250 directories group, is thought to be plotting a £350m rights issue by the end of the year to curb its massive debt burden.
The board, led by its chief executive, John Condron, is meeting its near 300 lenders, led by HSBC, to discuss and approve the Yellow Pages publisher's refinancing plans.
This process, during which Mr Condron will ask lenders to amend and extend their loan terms, is expected to last through the autumn. If, as expected, these plans are approved, the company will then ask shareholders to buy additional stock to help reduce the £3.8bn debt pile. Yell's market capitalisation is less than a 10th of its loan burden, though revenue was £2.4bn in the last financial year.
A media sector source said that Yell management is hoping to "raise as much as it can" to reduce its debt, but that shareholders were generally amenable to £350m being raised. The source added: "If a rights issue raises less than £250m gross, or even net of fees, there really is no point."
Investment banks JP Morgan and Rothschild are advising Yell on its refinancing. Rothschild has already reset loan terms in a deal last year. A spokesman for Yell declined to comment.
The company's shares closed at 46p on Friday, up 13.6 per cent on the start of the day's trading. The year high was 115p, reached last year, five months after Yell fell out of the Ftse-100 index.
Yell is likely to be one of a swath of rights issues launched once bankers return from their August holidays.
National Express, the embattled train and coach operator, confirmed on Friday that it had "discussed a potential equity raising with investors". This is expected to take the form of a £350m rights issue, as the company tries to reduce its £977m debt mountain.
The announcement came as the board refused a £700m, 450p-a-share offer from its biggest shareholder, Spain's Cosmen family. CVC, the private equity giant, is working with the Cosmens on the takeover attempt.
National Express's executive chairman, John Devaney, said: "We believe that we can create more value for shareholders by remaining independent and refinancing the group."
National Express shares closed at 398.4p on Friday, down 2.5 per cent on opening.Reuse content