Press Release

DBRS Confirms Yellow Pages Income Fund at STA-1 (low)

Telecom/Media/Technology
October 04, 2007

DBRS has today confirmed the stability rating of Yellow Pages Income Fund (Yellow Pages or the Fund) at STA-1 (low). The rating remains supported by (1) the Fund’s dominance as the incumbent directories publisher in Canada; (2) its directories and vertical media businesses, which continue to generate industry-leading EBITDA margins; (3) the Fund’s predictable cash flow from operations; (4) high cash flow from operations conversion due to low capital expenditure requirements; and (5) a conservative payout ratio of just under 90%, allowing for increased financial flexibility.

DBRS notes the Fund’s EBITDA is likely to continue to demonstrate good growth in 2007 following the integration of recent acquisitions. Pro forma the Aliant acquisition, DBRS expects EBITDA to improve organically at a rate of between roughly 4% and 7% at the end of the year.

On a year-over-year basis, DBRS expects the Fund’s cash available for distribution to improve, as cash flow from operations is expected to continue to increase, offsetting slightly higher capital expenditures in 2007.

Over the medium term, DBRS expects Yellow Pages to continue its trend of increasing distributions consistently in a disciplined manner. However, DBRS expects the Fund’s payout ratio to continue to decline in preparation for corporate conversion in 2011, at which time DBRS expects the surviving entity to remain a high-dividend-yielding corporation.

The Fund’s financial ratios are expected to remain relatively stable in 2007, strengthening modestly through the end of the year primarily as a result of EBITDA and cash flow from operations growth.

DBRS does not expect Yellow Pages to aggressively pursue acquisitions in the near term. However, DBRS expects the Company to maintain a disciplined, conservative approach to strategic acquisitions and their respective financings.

Ratings

Yellow Pages Income Fund
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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