DBRS Downgrades Yellow Media to B (low), Trend Remains Negative

DBRS has today downgraded Yellow Media Inc.’s (Yellow Media or the Company) Issuer Rating to B (low) from B (high); its Medium-Term Notes rating to B (low) from B (high), with an RR4 recovery rating; and its Exchangeable Subordinated Debentures to CCC from B (low), with an RR6 recovery rating. The trend on all ratings remains Negative.

DBRS notes that Yellow Media’s unsecured debt continues to have average recovery prospects (RR4; 30% to 50% expected recovery), while its subordinated debt has poor recovery prospects (RR6; 0% to 10% expected recovery) under a base case default/recovery scenario.

Today’s downgrade reflects the fact that the Company has made no progress in improving its liquidity position throughout the remainder of Q1 2012. The window for refinancing activities continues to diminish as the Company’s first debt maturity (of its roughly $2 billion of total gross debt) approaches in February 2013, which marks the beginning of a period of sizable and relatively steady debt maturities over the 2013 to 2016 time frame. As such, we believe that the likelihood that the Company’s financing activities in 2012 will involve some form of compromise for existing creditors has increased to a level that is no longer consistent with the previous B (high) ratings.

The Negative trend reflects the possibility that Yellow Media’s ratings could be further downgraded with the passage of time or in the event that the Company pursues some form of recapitalization.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are DBRS Criteria: Rating Leveraged Finance and Rating the Newspaper and Magazine Publishing Industry, which can be found on our website under Methodologies.