A syndicate of Canadian banks is leading $3 billion in credit lines to back Yellow Pages Group's acquisition of Advertising Directory Solutions from Bain Capital for C$2.55 billion. Scotia Capital is leading the debt and RBC Dominion Securities, CIBC World Markets, Bank of Montreal and National Bank of Canada--lenders in Yellow Pages' previous deal--are slated to stay in the Canadian dollar-only facility. "We are a Canadian company and we think it's a great opportunity to do business with our Canadian financial institutions," said Claire Lanctôt, v.p. corporate finance at Yellow Pages.
The credit will comprise a C$1.5 billion subordinated bridge-to-equity facility; a $1 billion term loan split into a C$750 million non-revolving single draw tranche and a C$250 million non-revolving multiple-draw tranche; and a $C$500 million revolver. ADS' bank debt and bonds will be repaid in the financing.
In the secondary market, ADS' first-lien and second lien traded at 100 1/2-101 and 102 1/2-103, respectively. The $769 million first lien is going to be taken out at par, while the $309 million second lien has call protection at 102, a trader said. But, "They still have three months to collect interest," the trader said, noting it's a yield call. The first and second-lien pieces are priced at LIBOR plus 4% and LIBOR plus 2%, respectively. J.P. Morgan and Bank of America lead the bank deal. The company also has $170 million of senior unsecured bonds.
Lanctôt noted the deal was not meant to be exclusive per se to the Canadians. "It's not because we didn't want the U.S. banks to participate, but quite frankly we don't really need the U.S. banks to participate at the level of the initial providers of finance." In syndication, Canadian branches of U.S. banks may come into the deal.
Yellow Pages participated in the auction process held by Verizon Communications that sold ADS to Bain Capital for C$1.23 billion last November. Time constraints and some overlapping businesses that could have made the process lengthier were probably factors that Verizon was not willing to consider, noted Lanctôt. "We were extremely disappointed last fall," she noted. But, Bain's involvement brought some value to ADS and "by shutting down the independent businesses that were losing operations this cleared the way from overlapping businesses."
The equity transaction will be completed in April and the full financing toward the end of June. Lanctôt said pricing on the facilities will be decided during the syndication process.
The acquisition will provide Yellow Pages with the opportunity to create a strong and unique national platform, she said. "We are going the have a single brand coast to coast, an expanded geographic footprint reaching 93% of the Canadian population and the most complete and comprehensive on-line directory," said Lanctôt. "Ultimately we've always felt that this was the natural expansion of our business. Bain stepped in and now stepped out."