How the Finco buy-back worked

Author: | Published: 1 Dec 2009

Many corporate borrowers today need to refinance but are unable to call on relationship lenders' balance sheets due to wider problems in the banking markets. So they have to choose between a payment default (an inability to refinance a loan resulting in an obligation to repay, which cannot be met) and a one-sided negotiation with lenders (knowing that they hold the whip hand over a borrower unable to finance elsewhere).

With the UK's best-known directories business, Yell Group, the situation was more complex still. Debt of around £3.8 billion was due to be repaid in 2011 and 2012, but large scheduled amortisation payments due in 2010 and 2011 meant that the company needed to refinance its loans. The dislocation of the global debt markets meant that Yell was unable to effect a standard refinancing (existing lenders agreeing to maintain credit lines in exchange for slightly amended terms and conditions), and...