Solocal Bonds Fall as Shareholders Reject Debt Restructuring

  • Notes fall to lowest since August a day after vote on plan
  • Rejection will force company to draw new deal, say opponents

Bonds of Solocal SA fell to a two-month low after shareholders blocked a plan to restructure 1.2 billion euros ($1.3 billion) of debt, casting doubt over its second financial reorganization in two years.

The French directories publisher’s 350 million euros of notes due in June 2018 fell 4 cents on the euro to 58 cents, the lowest since Aug. 25, according to data compiled by Bloomberg. Solocal failed to secure the backing of two-thirds of shareholders at a meeting in Paris on Wednesday and management must now draw up a new restructuring plan, an external company spokeswoman said.

The company, previously known as PagesJaunes, obtained creditors’ support last week to cut its debt by 70 percent and raise fresh capital as it shifts focus to digital products amid declining demand for printed directories. The plan was opposed by Regroupement PPLocal, a grouping of minority backers, who said the restructuring was too favorable to bondholders.

“This vote will force the company to renegotiate the deal with creditors on better terms for shareholders,” said Baudoin de Pimodan, who represents PPLocal and was at the meeting on Wednesday. “We estimate that more than 60 percent can’t afford to participate in the capital increase as the majority of investors in Solocal are retail shareholders.”

The group wants management to negotiate more flexible debt covenants allowing for profits to be reinvested into the business, and to seek a large, long-term investor, de Pimodan said. Three PPLocal representatives were appointed to the board of directors on Wednesday, the Solocal spokeswoman said.

Shares Suspended

Trading of Solocal shares was suspended on Thursday in Paris, according to a stock exchange statement. The stock traded at about 3.2 euros on Wednesday from a high of 370 euros in June 2006, according to data compiled by Bloomberg.

“Restarting negotiations is a matter of urgency,” analysts at Natixis Securities led by Paris-based Jerome Bodin wrote in a note. “There’s a new degree of uncertainty and risk.”

Creditors that backed the plan include Paulson & Co., Monarch Alternative Capital, Farallon Capital and Amber Capital, Solocal said in a statement earlier this month.

Sevres-based Solocal restructured 1.6 billion euros of debt in 2014 after earnings halved in the previous six years amid a slump in Europe’s printed directories industry.

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