ShareSoc Blog29 Aug 2013 01:07
Hibu Shareholder Action Group formed
Posted by ShareSoc at 10:27, July 29 2013.
Hibu Shareholder Action Group formed
Hibu (formerly called Yell) had its shares suspended last week. The letter from the Chairman on the 25th July spelled out to shareholders that the lenders to the company are effectively acquiring the business as a result of the planned restructuring and existing ordinary shareholders will have no future interest. At the time of suspension the shares were priced at 0.17p valuing the company at £4 million. Bearing in mind that the last reported annual revenue for this company was £1.6bn (to March 2012, but later reported as £1.3bn to March 2013), you might think it would be worth more. But losses were £1.1bn in 2012, and net debt was £2.2bn. Unbelievably debt had been as high as £4.2bn in 2009.
Shareholders should not have been expecting any better. In December 2012 the company issued an announcement stating that “A number of capital structure options are being considered. The Group can confirm that the options being considered are likely to result in little or no value being attributed to the Group’s ordinary shares”. It has also been made plain that the company has been in breach of its banking covenants for some time, and hence might be vulnerable to demands for instant repayment, which of course it could not make. In essence the company has been under the control of its bankers for some time.
Hibu got in difficulties partly because its traditional business of publishing “Yellow Pages” directories was undermined by the internet, and it did not adapt fast enough. But there were a number of past strategic decisions that compounded the problem and resulted in the excessive debt.
Some ordinary shareholders are not willing to accept this fait accompli and have formed a “Shareholder Action Group” (you can find their forum quite easily on the internet). They are threatening legal action as they blame the current directors for ignoring their interests.
Comment: Shareholders surely needed to take action a lot earlier if they thought the directors were not acting in their interests. It is likely to be enormously difficult to change matters now because the bankers can dictate to the directors what they will do, under threat of pulling the plug and forcing the company into administration. Shareholders would likely see nothing in that scenario either, but the bankers might also be worse off so it may have been possible to force some recognition of the interest of ordinary shareholders. But was there any alternative refinancing or restructuring possible in this case that would have kept the company afloat? That is the question shareholders should ask because otherwise they may as well accept the inevitable.
It seems the restructuring will be done via a scheme of arrangement, which shareholders will need to vote for. No doubt there will be threats of &
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