Yell to tackle debt with a £500m share issue

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Yell has been attempting to deal with its £4 billion debt mountain for months, and has put a comprehensive refinancing proposal to its top 20 lenders led by HSBC, who have mostly agreed to the deal.

Chief executive John Condron has in recent weeks gained the support of his big shareholders for such a fundraising but only in return for a relaxation of the repayments demanded by the lenders.

On top of the £500 million, Yell has offered to repay a further £300 million of the debt within 18 months, potentially by issuing a high-yield bond or extending the size of the share sale.

Now the proposal has to be put to the 180 or so smaller lenders who make up about 60% of the group's debt.

Yell hopes to have the plan approved in time for the share offer to go ahead before the end of the year.

As well as reducing the risk of the lenders by cutting the size of Yell's debt, Yell will pay them about £35 million.

In return, they will refinance their remaining loans at a rate of between 3.5% and 4% on top of the London interbank offered rate (Libor) — lower than many similar deals being done by troubled companies.