UPDATE 4-Yell refinances with $1.1 bln share issue
* To issue 1.6 bln shares at 42 pence apiece
* Half to be sold via placing, half via open offer
* UK print operations lift first-half results
* Share gains fall back to 2 percent
(Adds banker comment, updates shares)
LONDON, Nov 10 (Reuters) - Struggling British yellow-pages publisher Yell Group Plc (YELL.L) set out the last stage of a protracted refinancing on Tuesday with a larger-than-expected fully underwritten share issue.
Taking advantage of renewed market appetite for equity, Yell said it would sell 659 million pounds ($1.1 billion) worth of stock, raising a net 574 million after expenses to pay down some of its 4 billion pound debt pile.
Yell joins a growing list of companies such as transport group National Express Plc (NEX.L) and electronics group Laird Plc (LRD.L) which have said in recent weeks they are issuing equity to cut their debts.
"This is basically taking debt off the agenda," Yell Chief Financial Officer John Davis told Reuters in a telephone interview on Tuesday.
Yell shares, which have recovered from lows around 21p seen earlier this year, rose as much as 16 percent in early trade but by 1505 GMT were up just 2.2 percent at 45.96 pence, outperforming a flat European media index .SXMP.
Like other directories groups, Yell has had to contend with spending cuts by the small businesses on which it depends for classified advertising revenue, as well as increasing online competition from Google Inc (GOOG.O) and others.
One banker said on Tuesday: "This is a really tough business model that slowly declines until it blows up."
"Our trading desk have been advising people to buy the A loan and short the equity which means that we're confident that the business is able to operate and make cash, but have no confidence in its longevity."
French peer PagesJaunes (PAJ.PA) said last week it expected sales momentum to worsen in the fourth quarter, partly due to the poor macroeconomic outlook.
Yell's share issue comes after it recently agreed a refinancing of its debt that was conditional on its raising at least 500 million pounds by selling new stock. The fees of 85 million pounds include both debt and equity aspects of the deal.
The company plans to issue 1.6 billion shares at 42 pence apiece, a 12.5 percent discount to Monday's closing price. The measure will triple the number of Yell shares in issue.
Half will be sold through a placing to agreed buyers and half will be sold through an open offer.
Brokerage Panmure noted that the price discount reduced the likely dilution to existing shareholders and said the company's outlook was still weak although comparatives were improving.
The issue will reduce yell's debt-to-EBIDTA (earnings before interest, depreciation, tax and amortisation) ratio to about 5 from about 6.
SPENDING CUTS
Yell's second-quarter results were lifted by an unexpected improvement in its UK print operations, which it attributed to greater customer confidence and specific service offers tied to print ads that allow clients to monitor consumer response.
Revenue for the quarter to end-September fell 15.5 percent at constant currencies, compared with the company's previous guidance for a 17 percent fall, while adjusted EBITDA fell 24 percent, versus guidance for a 30 percent drop.
Yell said, however, it expected little improvement in business for the rest of the fiscal year.
"We are not assuming any significant improvement in the rate of year-on-year revenue decline for the remainder of the fiscal year, although we are seeing the rate of decline stabilising," Yell said.
Three of Yell's four markets -- Britain, the United States and Spain -- were hit hard early in the global economic downturn. The company also has operations in Latin America.
For a Reuters column on Yell's rights issue, double click on [ID:nL5483686]
(Additional reporting by Tessa Walsh) (Editing by David Holmes and Jon Loades-Carter) ($1=.6002 Pound)
