January 29, 2013 / 2:00 PM / in 5 years

UPDATE 3-Seat Pagine debt slumps on restructuring fears

(Adds stock market regulator Consob banning short-selling)

By Danilo Masoni and Natalie Harrison

LONDON, Jan 29 (IFR) - Seat Pagine Gialle’s bonds slumped by a third in the debt markets on Tuesday after the Italian phone directory firm suspended an interest payment just five months after a drawn-out debt restructuring.

Seat PG said its 2011-2013 business plans were under review, as were its 2015 targets, but also said it had the resources to honour upcoming debt maturities.

Like other directories firms, including France’s PagesJaunes and Yell in the UK, Seat PG has been struggling to reduce debts and fight competition from Internet search giants such as Google.

The company’s plight has been made worse by a weak Italian economy and a decline in print advertising sales. It said advertising sales were down 23 percent in November compared to the same month a year earlier.

Seat PG was due to make a 42-million-euro interest payment on a 788 million euro ($1.06 billion) senior secured bond on Jan. 31. This has been suspended, but the company has a 30-day grace period before non-payment triggers a default.

The bond, which matures in January 2017, slumped to just 39 percent of face value on Tuesday, according to Tradeweb.

“The new management is taking a view on how the company is doing, and although it has cash, whether it makes sense to use that to pay the debt interest,” said one source familiar with the situation. “There was always the expectation that a further restructuring would have to be implemented,” the source added.

Seat PG was left with heavy debts after a 5.7 billion euro leveraged buyout in 2003 by private equity firms CVC, Permira and Investitori Associati.

The completion of a lengthy debt restructuring last year cut Seat PG’s leverage to around 3.7 times earnings before interest, tax, depreciation and amortisation (EBITDA) from 7.0 times. But that leverage ratio is expected to rise again as earnings remain under pressure.


The company is also due to make a decision on whether to make a 6.3 million euro interest payment on a portion of its 686 million euro loans.

A decision on the interest payments will depend on the outcome of Seat PG’s business review but will come before the end of the grace period. Its board will meet next before Feb. 6.

Seat PG’s shares closed 41 percent lower on Tuesday, and stock market regulator Consob said it has banned short-selling on the stock as of January 30.

Seat PG’s loans were bid at 43, down from 65.5 on Monday, according to Thomson Reuters LPC data.

The company had completed a 19-month restructuring of 2.7 billion euros of debt last August, including a 1.3-billion-euro subordinated bond, known as the Lighthouse bond, and 720 million euros of senior loans, after suspending interest payments on the subordinated bond in 2011.

Bondholders became the owners of the company by swapping around 1.2 billion euros of claims into 90 percent of voting share capital.

Minority shareholders are due to attend a hearing in the District Court of Rome on Tuesday after filing a motion that includes seizure of the company’s assets.

Seat said: “The company is convinced that the motion is without merit and shall seek the dismissal of the case based on valid grounds.”

PagesJaunes in France is also in the process of restructuring its debt where lenders will swap debt for equity.

Mediannuaire, the KKR and Goldman Sachs Capital Partners-controlled holding company that owns 54.7 percent of the French directories firm, obtained 90 percent of senior lender consent for a restructuring plan earlier this month.

That will pave the way for a debt-for-equity swap through a fast-track court procedure.

$1 = 0.7429 euros Reporting by Reuters's Danilo Masoni and Natalie Harrison of IFR Markets; additional reporting by RLPC's Isabell Witt; Editing by Tom Pfeiffer, Jane Merriman and Chizu Nomiyama

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