Moody's downgrades Yell

Moody's Investors Service said it downgraded the corporate family rating of Owl Finance Ltd. to Ca from Caa2 and its probability of default rating to C-PD from Caa2-PD. Owl Finance is the indirect 100% shareholder of Yell Ltd. Concurrently, the agency cut the rating for the £214 million of senior secured notes due 2023 issued by Yell Bondco plc to Ca from Caa2.

The ratings downgrade follows the company's announcement on Jan. 28 that it agreed in principle with majority of its bondholders, representing around 97% of the outstanding notes, for a debt restructuring transaction, the agency said.

Bondholders will exchange £214 million of outstanding notes for £65 million of amended notes and 95% of equity in Yell Holdco Ltd., the company's immediate parent. The agreement is expected to close in March or April.

“Moody's expects to consider this transaction as a distressed exchange which is a default under Moody's definitions. The agency will assign an /LD (Limited Default) to the PDR for a period of three business days, on completion of the 30-day grace period if Yell does not make the coupon payment due on its £214 million of outstanding bond on March 15, 2022, or upon the signing of the proposed restructuring agreement, whichever takes place earlier,” the agency said in a press release.

The outlook is negative.

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