in order for yellow media to refinance before may 2017 they have to pay a 5% premium.
they are presently paying an effective 9.1%. These are rated B+. This burns $82.58M in interest payments per year.
B+ is around 5.82% at 5 year rates (below)
5yr A is 1.60%
Net Debt by Year End (My Forecast)
Q12013 $738.8M
2013 – $533.1M
2014 – $325.0M
2015 – $126.0M
My thought is that:
1. In order for analysts to upgrade the debt to A which should subsequently get refinanced at around 1.6% and amounts to a savings of what is at the end of 2013 to be $40M/year for a one time cost of $26M, the equity to debt capitalization ratio of the company needs to be above 50%.
I think that we have to wait till 2014. As of right now Yellow Media is capitalized as $738M+$232M=$970M.
At the end of 2014 keeping that EV constant puts it as:
Equity: $645M or $23/share
Debt: $325.0M
This is arguably highly rated.
At this point in time the company would have $732M of debt and $408M of cash. Refinancing would cost $36.6M one time. The present rate of interest payments going into it would be $66.61M. Coming out of it they would (at 1.6%) have debt payments of (assume ~$450M of debt so $88.4M of cash) $7.2M/year. This would free up $59.41M/year of money not going into interest payments. That puts their unburdened LFCF at $250M/year with low debt/ebitda and no restrictions on being able to pay it out to shareholders.
Around this time EBITDA should show signs of stabilization.
P/LFCF could easily yield 10%. Translates to a fully diluted share price of $71.22. $0.60/month dividends.
Optional Redemption
(a) At any time and from time to time prior to May 31, 2017, the Issuer may redeem
all or part of the Notes at its option, without premium or penalty, at a
redemption price equal to 105% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date).
(b) At any time and from time to time on or after May 31, 2017, the Issuer may
redeem all or part of the Notes at its option, without premium or penalty, at a
redemption price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date).
$43.06