Dominion Lending Centres Clearlease Reports Yellow Media (TSX:YLO) says Trader sale will pay down debt; reaffirms dividend policy

Dominion Lending Centres Clearlease Reports Yellow Media (TSX:YLO) says Trader sale will pay down debt; reaffirms dividend policy

VANCOUVER, BC (June 1, 2011) Dominion Lending Centres Clearlease Reports June 1, 2011,
Yellow Media Inc. (TSX:YLO) said Tuesday May that the $745-million sale of its Trader Corp. auto advertising unit is going ahead as planned to help reduce its red ink.

“The proceeds from the sale will be largely used to reduce indebtedness and for general corporate purposes,” Yellow Media said in a statement.

“While it is Yellow Media Inc.’s policy not to comment on market rumours or speculation, the company is today confirming that the transaction is proceeding as planned and in accordance with the terms of the definitive agreement,” Yellow Media said.

The company announced the sale of Trader Corp. to a group of investors led by Apax Partners in late March.

The Montreal-based publisher of Yellow Pages online and print directories also said it will keep its current dividend payment at the annual equivalent of 65 cents a share.

Yellow Media issued a news release after a request by the Investment Industry Regulatory Organization of Canada, on behalf of the Toronto Stock Exchange. The regulator asked the company to respond to market speculation about the company’s dividend policy and the state of the Apax deal.

“The company believes that the current trading price of its shares does not adequately reflect business fundamentals and future prospects of the business.”

National Bank Financial analyst Adam Shine said that Yellow Media’s shares have gone to new record lows in recent days, but doesn’t see a credit default risk. At the end of March, Yellow Media’s net debt was about $2.9 billion, he wrote in a research note to clients.

Shine said that even though Yellow Media is transitioning to a digital company, its success isn’t assured.

“As for the online world, a multitude of competitors abound, with increasing innovation from the likes of Groupon and Facebook as well as Google which has increased its employee base in Canada and become more vocal about connecting with small and medium-sized enterprises with its recent campaign to offer at least 100,000 free websites in 2011,” he wrote.

On its dividend policy, Yellow Media said it will continue to pay a cash dividend of 65 cents a common share and has a stated dividend policy to pay out between 60 per cent and 70 per cent of adjusted earnings per share.

“The dividend policy is reviewed periodically by the board of directors of Yellow Media Inc. taking into account a number of factors including, among others, the current and prospective performance of the business.

Shine questioned whether Yellow Media can sustain its current dividend, noting there could be further declines in the company’s stock.

“That said, one must also wonder if a yield which now sits at nearly 17 per cent is sustainable in the context of YLO eventually opting to possibly cut its dividend and divert cash flows to further debt reduction.”

Yellow Media owns Yellow Pages Group and Canpages, which operate Yellow Pages directories,,, and other websites.

On the TSX, Yellow Media shares fell five cents to close at $3.78, a drop of 1.3 per cent in trading of more than 9.5 million shares.

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