Unitas and OTPP wave good-bye to stake in Yellow Pages
LESS THAN FOUR YEARS AFTER UNITAS Capital and the Ontario Teachers Pension Plan (OTPP) completed New Zealand’s largest leveraged buyout – paying a whopping NZ$2.1 billion ($1.57 billion) for the country’s Yellow Pages franchise – the private equity funds’ stakes in the company have been rendered entirely void, and Yellow Pages’ army of lenders have taken over the asset to restructure and revitalize the debt-ridden outfit.
The drastic move comes after New Zealand Yellow Pages’ Board last week voted to restructure the company’s debt and its management. Specifically, Yellow Pages’ obligations have shifted from owing NZ$1.17 billion ($903 million) of senior debt to a streamlined, NZ$500 million ($386 million) in senior debt plus NZ$250 million ($193 million) in convertible notes. In doing so, its lenders – a 25-member consortium that includes Deutsche Bank, RBS and Macquarie Group – have largely cut their losses in order to create a more manageable debt structure, with Yellow Pages’ private equity backers receiving nothing.
Yellow Pages’ outlook, and those of Unitas and OTPP, hasn’t always been so grim. In 2007, the private equity funds paid a multiple of 12.9x Ebitda to acquire the asset, coming at a time when directories were a big PE target globally. In 2004, Apax Partners and Hicks, Muse Tate & Furst floated the UK’s Yellow Pages directories group Yell on the LSE, making a 2.5x return. One year later, Verizon Communications put its US directories business up for sale targeting up to $17 billion, while the Carlyle Group had previously sold directory Dex Media to RH Donnelley for $9.5 billion.
Yet New Zealand Yellow Pages, despite being the largest name brand of its kind in the market, did not see those returns, primarily because the deal was transacted at the height of the boom, before the lessons of over-leveraging had been learned. In July 2010, Unitas and OTPP attempted to sell Yellow Pages and approached several other major private equity firms – reportedly CVC Capital Partners, KKR and PEP – and local industry players. Yet the process was suspended in September after the PE funds did not garner satisfactory bids. By the time Yellow Pages’ sale was pulled, Unitas and OTPP were said to be aiming for a sale price of 6x to 6.5x, and could not find a buyer.
Earlier this month, Yellow Pages posted a NZ$1.44 billion ($1.11 billion) annual net loss. OTPP declined comment on the outcome by the time of deadline, and Unitas did not respond to AVCJ queries.
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