finetrader Posted September 30, 2011 Share Posted September 30, 2011 dead business or a stock trading at an incredible ratio of P/FCF=0,5 ? i bought a little today. Link to comment Share on other sites More sharing options...
NormR Posted September 30, 2011 Share Posted September 30, 2011 dead business or a stock trading at an incredible ratio of P/FCF=0,5 ? i bought a little today. Problems ... 1. Big debt 2. Banks lowering debt limits substantially 3. Forced Pref Share conversion likely - big dilution 4. Selling off 'crown jewels' - past FCF very unlikely to repeat 5. Core business in death spiral / runoff 6. Management isn't working in runoff mode. Advantage ... 1. Hated and very low price Too hard pile for me. Link to comment Share on other sites More sharing options...
finetrader Posted September 30, 2011 Author Share Posted September 30, 2011 past FCF IS unlikely to repeat but the P/FCF ratio I put take into consideration the divestiture of Trader. Link to comment Share on other sites More sharing options...
NormR Posted September 30, 2011 Share Posted September 30, 2011 past FCF IS unlikely to repeat but the P/FCF ratio I put take into consideration the divestiture of Trader. The key is the FCF that is available after all of the debt is paid off. Is there a residual? Maybe. Will it go to shareholders or the bankers? Link to comment Share on other sites More sharing options...
beerbaron Posted September 30, 2011 Share Posted September 30, 2011 Guys look at the debt, it make much more sense then the common. The equity will get whipped-out and bondholder will get the remaining. 21/Aprl/2014 55.00$ 33.28% BeerBaron Link to comment Share on other sites More sharing options...
finetrader Posted September 30, 2011 Author Share Posted September 30, 2011 I don't plan on holding very long. It is price for bankruptcy already. I see upside potentiel with no dowside risk. A quick double and I would run with it. Link to comment Share on other sites More sharing options...
lessthaniv Posted September 30, 2011 Share Posted September 30, 2011 Be very careful there Beerbaron, The renegotiated debt facilities mature in Feb, 2013. That's a year ahead of this bond. You're betting the debt gets renewed at that time with no significant implications. If the declining directories business (which is a majority of their sales) isn't offset by the growing online businesses then the cashflow will be pinched. They are committed to paying $25M/quarterly but they also have other debt outstanding. Much of their asset base is goodwill. They just wrote down $2.9B but that still leaves $3B and another signifcant chunk of intangilbes. In a liquidation I'm not sure what there properties would generate. Link to comment Share on other sites More sharing options...
beerbaron Posted October 1, 2011 Share Posted October 1, 2011 Be very careful there Beerbaron, The renegotiated debt facilities mature in Feb, 2013. That's a year ahead of this bond. You're betting the debt gets renewed at that time with no significant implications. If the declining directories business (which is a majority of their sales) isn't offset by the growing online businesses then the cashflow will be pinched. They are committed to paying $25M/quarterly but they also have other debt outstanding. Much of their asset base is goodwill. They just wrote down $2.9B but that still leaves $3B and another signifcant chunk of intangilbes. In a liquidation I'm not sure what there properties would generate. Thanks for the words of caution, I'm not buying yet. I like crappy companies like RIM because they are at least in a growing business, but yellowpages are the chronicles of a forecasted death. Equitites have no chance of having any value in the mean term... the cash flow will never be enough to pay back all that debt. People should not even look about at it in the equity part, debts could have some value. lessthaniv, you hit it right on the nail, the key here is timing. Look at their 2012 debt trading in the high 90s and the huge difference in yield with other maturities... that says it all. BeerBaron Link to comment Share on other sites More sharing options...
oec2000 Posted October 1, 2011 Share Posted October 1, 2011 The Yellow Submarine. :( This is a stock I know painfully well! I originally bought because I felt that their relationships with small and medium scale enterprises was a source of competitive advantage that they could monetize online. At the same time, I thought that their print business runoff would provide enough cashflows to secure my downside. What I did not count on was an overconfident management deciding to blow some $2b on misguided acquisitions to try and accelerate their online transition. If they had used the $2b to pay down debt, we would not be having this discussion. The MTNs, debentures and preferreds are trading so low that it makes no sense to buy the common. It makes much more sense to buy the debt or the preferreds (if you are feeling more adventurous). Their liabilites are as follows: Direct loans 250m (my estimate after $500m repayment from Trader sale proceeds) MTNs 1,400m (my estimate after approximate $200m repurchase from Trader proceeds) Debenture 200m (convertible at YLO's option into common subject to conditions) Conv prfds 400m (convertible at YLO's option at $2 per share) Perp prfds 320m (not redeemable) Against this, they currently generate about $3-400m of annual cashflow. The direct debt restructuring gives them breathing room and they should have no problem paying it off over the next two years. They do not have to worry about the debenture, convertible preferreds or the perpetual preferreds since the latter is permanent and the first two are convertible at their option. What is interesting is that the MTNs are trading at deep discounts. If they could buy back the debt at 50% off, they could accomplish this in 2-3 years IF they can sustain their cashflow at the 3-400m level. So, this is not a guaranteed bankruptcy by any means. However, there are many moving parts which could go wrong over the next couple of years. The key is how well they can hold on to their print business and whether they can do a better job conserving their cash in growing the online business. I would feel more comfortable if FFH were on their side providing them with some contingent capital but who knows? My guess is that the MTNs are worth substantially more than zero and that is where I would place my bet. Not being a credit analyst, I don't fully understand how covenant and default clauses could affect how this plays out but it seems to me that this is a business that still generates enough cashflow to give creditors the incentive to work with them rather than pull the plug. Link to comment Share on other sites More sharing options...
Guest Hester Posted October 1, 2011 Share Posted October 1, 2011 I see upside potentiel with no dowside risk. This is a potential downside risk http://en.wikipedia.org/wiki/Internet Link to comment Share on other sites More sharing options...
Uccmal Posted October 1, 2011 Share Posted October 1, 2011 Myself and a couple of friends did a great deal of work on ylo. My conclusion which may differ from my friends is 0.00 across the board for the bonds, preferreds, and common. The real question is how long? Now that the dividend is gone on the common, the how long question becomes irrelevant for that security. It will go to zero. YLO charges thousands/year for listings. Goog and others are coming in with flat rate pricing at less than $100 - scuttlebut. All anyone has to do is set up a call center and server farm. Call all of Yellows customers, who are listed on line, and ask them if they would like to list their phone number web pages etc. A yellow pages is just a predecessor of a search engine. To get an idea what YLO is worth apply $80 revenue from every listing instead of 3000. They will never be able to come close to paying down the debt. Their creditors are starting to panic. FWIW, Trader Corp is likely worthless as well in the face of Kijiji. Marc Tellier has to be one of the worst all time business people. Overpaid for every acquisition and ten years too slow on turning YLO into a fully developed search engine. The debt is not backed by any assets. Goog/Bing/Yahoo are not going to pay more than the price of paying someone for 15 minutes/year to get the listing, and the cost of a a few megabytes of server space. Say $80 per subscriber x 2 million subs = 160 m. for the entire business. Link to comment Share on other sites More sharing options...
Guest Hester Posted October 1, 2011 Share Posted October 1, 2011 I wouldn't overestimate their relationships with small companies. It is painfully easy for small companies to gain an edge on larger ones with google adsense, and it makes no sense, pardon the pun, to advertise on a dying medium that most people throw away as opposed to internet search or elsewhere, which is a market that is growing. I've observed with companies in industries in heavy decline, management will do some crazy things. The incentive I guess is to keep their job and all the benefits for as long as possible and that cant be achieved through just letting the business slowly fade away, so they get creative. A large shift from one business model to another is difficult to do and high risk when you are overloaded with debt. Link to comment Share on other sites More sharing options...
Uccmal Posted October 1, 2011 Share Posted October 1, 2011 Oec, If FFH buys into yellow i will seriously consider selling my FFH stock. Reminds me too much of Canwest Global. :) Link to comment Share on other sites More sharing options...
beerbaron Posted October 1, 2011 Share Posted October 1, 2011 Oec, If FFH buys into yellow i will seriously consider selling my FFH stock. Reminds me too much of Canwest Global. :) They did buy a token amount of Supermedia! BeerBaron Link to comment Share on other sites More sharing options...
ubuy2wron Posted October 1, 2011 Share Posted October 1, 2011 Myself and a couple of friends did a great deal of work on ylo. My conclusion which may differ from my friends is 0.00 across the board for the bonds, preferreds, and common. The real question is how long? Now that the dividend is gone on the common, the how long question becomes irrelevant for that security. It will go to zero. YLO charges thousands/year for listings. Goog and others are coming in with flat rate pricing at less than $100 - scuttlebut. All anyone has to do is set up a call center and server farm. Call all of Yellows customers, who are listed on line, and ask them if they would like to list their phone number web pages etc. A yellow pages is just a predecessor of a search engine. To get an idea what YLO is worth apply $80 revenue from every listing instead of 3000. They will never be able to come close to paying down the debt. Their creditors are starting to panic. FWIW, Trader Corp is likely worthless as well in the face of Kijiji. Marc Tellier has to be one of the worst all time business people. Overpaid for every acquisition and ten years too slow on turning YLO into a fully developed search engine. The debt is not backed by any assets. Goog/Bing/Yahoo are not going to pay more than the price of paying someone for 15 minutes/year to get the listing, and the cost of a a few megabytes of server space. Say $80 per subscriber x 2 million subs = 160 m. for the entire business. Wow 160 million enterprise value for a business that generated more than than that in EBITDA in the last quarter. Do you not think that you are just being a little too bearish. Creditors are STARTING to panic? I just purchased convertible debs yesterday at 15. Does this business face any more headwinds than any radio station, tv station, newspaper, etc. Management has stopped payments to common which amounted to 550 million in the last 12 months which will now be directed towards debt repayment. This thing runs into a brick wall in the 1st quarter of 2013 unless there are covenants on their credit lines which accelerate this or someone buys 2/3 r of the common and triggers the change of control put for the medium term notes. The terminal value ie ten years from now may be in fact zero. Their is a reason why advertisers place a yellow pages ad .... it works... they can see a return on their investment, it is the same reason they place ads on tv, in magazines,and any of the other alternatives. This thing needs perhaps a restructuring and perhaps a change at the top but its a little premature to be calling for the disposal of its corpse. Link to comment Share on other sites More sharing options...
Uccmal Posted October 1, 2011 Share Posted October 1, 2011 ubuy2wron, IMHO, the destruction of this business is accelerating. Two simple questions for anyone? 1) when you want to access a companies phone number what do you do? 2) what is to stop anyone from providing the same service at a fraction of YPs cost? I will follow on with this: What is the asset value of YLO? Link to comment Share on other sites More sharing options...
Uccmal Posted October 1, 2011 Share Posted October 1, 2011 I will start off with my own answers: 1) I google it on my BB or my computer. Every business i go into does the same thing 2) nothing Link to comment Share on other sites More sharing options...
finetrader Posted October 1, 2011 Author Share Posted October 1, 2011 the debenture might be worth zero, but I would buy it would the price go to 6$. 1year payback period sounds good to me. It's not like we're very far from it. Link to comment Share on other sites More sharing options...
ubuy2wron Posted October 1, 2011 Share Posted October 1, 2011 the debenture might be worth zero, but I would buy it would the price go to 6$. 1year payback period sounds good to me. It's not like we're very from it. Kinda of my logic buying it @15. For anybody who cares to examine this co. paid more in income taxes last quarter than it paid in interest on its MTN and debentures and div. on its pfds. I am unaware of the covenants on its credit lines but it runs into a wall in the 1st quarter of 2013 the bank lines may not be re- renewd and then they have a MTN due in the fall of 2013. Is this company any different than a teleco which has declining land line revenues a music publishing co or a suit-lining manufacturer. There still exists companies that make buggy whips. This company has been funded almost entirely with retail investors check the holdings of its MTN and debs, they are clearly panicking . I would not be at all surprised if the same entities that shorted this are not buying the debt as we speak. Link to comment Share on other sites More sharing options...
Uccmal Posted October 1, 2011 Share Posted October 1, 2011 I think the problem is that ad renewls are going to come in lower and lower and they are going to be forced to reduce prices. That will in turn kill cash flow to pay down debt. Fewer and fewer people are using Paper yp. WHen using online directories having a bigger, prettier ad makes no difference, so one can list with any of their competitors at a fraction of the price. So the only way that ylo can compete is on price. You will see cashflows start to trend down very quickly. Any company that slashes its dividend twice in two months, and writes down half its assets is in deep trouble. I got stung like this before with Laidlaw. I dont think anyone is going to recap this and a competitor is not going to pay more than what I have suggested for their existing business when they can just take it. I think it is going to happen very fast and past cash flow or taxes paid is not going to mean much going forward. As to your comments about other busines: 1) canwest died a quick death - similar situation 2) many people keep their landlines for broadband - the prcing power has been lost for local 3) newspaper have been pounded but enough older citizens still by them to keep them alive barely 4) i dont know anybuggy whip makers. Sorry about the typos - my ipad is hard to type on. BTW - i think the demise of paper may not bode well for Fbk. It has been years coming but we are very quickly moving to a paper less world. I read all of ylo's filings online and summarized findings on computer. That is also what is the growth area for Telcos. Believe me I have tried to work out the upside case for ylo but cannot stongly define it. Link to comment Share on other sites More sharing options...
ubuy2wron Posted October 1, 2011 Share Posted October 1, 2011 AL, Pretty much all of the telco print media spin outs have failed the common denominator has been too much debt applied to a declining revenue stream.They sell advertising both print and online, the print is declining the online is growing, up until last quarter the combined revenue was stable. This is no longer the case. People buy ads because they work a lot of old people still use yellow pages my son never has and never will but he has their app on his phone. If the print business just collapses as opposed to a gradual decline then this is prolly a zero for the equity but to make the same statement about the debt is just way too premature. Canwest had a ton of bank debt the debt did not get a zero return people who bought the debt at depressed prices often make out very well. It is what distressed debt investing is all about. Link to comment Share on other sites More sharing options...
Uccmal Posted October 2, 2011 Share Posted October 2, 2011 ubuy2wron, I dont know much about distressed debt. As I mentioned I am having trouble putting a terminal value on ylo. I do however, have high respect for your analysis. I will keep watch on this one. A. Link to comment Share on other sites More sharing options...
ubuy2wron Posted October 2, 2011 Share Posted October 2, 2011 ubuy2wron, I dont know much about distressed debt. As I mentioned I am having trouble putting a terminal value on ylo. I do however, have high respect for your analysis. I will keep watch on this one. A. Al the respect is mutual. I think the area of cigar butt or buggy whip investing is interesting and potentialy very profitable. It prolly only works for the individual investor because of liquidity concerns that institutional money has. Warren spent a good part of his career making cigar butt investments and only changed this practice after meeting Charlie.I think every one is having difficulty placing a terminal value on YLO but if the value is zero in ten years it prolly should be bought if it is zero in ten months well you know the answer. Link to comment Share on other sites More sharing options...
beerbaron Posted October 13, 2011 Share Posted October 13, 2011 Anybody think the equity is really worth something? This company would have to generate 500M of FCF for the next 5 years before the debt gets repaid. Really, what are the odds of that? The only sensible way is to go as senior as possible. Funny statement from my mom about Yellow Media: What kind of idiot would buy stock in Yellow Pages, the only thing we do with these things is throw them out when the new one gets in. She is 67... BeerBaron Link to comment Share on other sites More sharing options...
Myth465 Posted October 13, 2011 Share Posted October 13, 2011 I would listen to mom. I havent even looked at this but there has to be easier ways to make money.... Link to comment Share on other sites More sharing options...
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