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WALL STREET vulture funds are homing in on a dramatic takeover of the struggling owner of Britain’s Yellow Pages.
They will seize control of the loss-making phonebook publisher, now called Hibu, in a deal that will wipe out shareholders and more than halve its £2bn-plus debt pile.
Under the debt-for-equity deal that is expected to be unveiled within weeks, 300 creditors, which include hedge funds, banks and bondholders, will become the new owners of the former FTSE 100 giant.
Hibu, which has 13,000 employees and changed its name from Yell last year, has had to be rescued after building up towering debt during a spending spree. It has also suffered from ferocious competition from internet search engines.
Lenders, which include the fund that manages the wealth of the veteran investor George Soros, are expected to write off as much as £1.5bn of its £2.3bn borrowings in return for ownership of the business. The deal, which Hibu's board hope to unveil alongside annual results, will mark one of the biggest takeovers of a British firm by it's creditors and underline the spectacular fall from grace of a company that once was a fixture of the FTSE 100.
Hibu's shares, which traded above 600p five years ago, closed at less than hallf a penny on Friday. The company's debts total £2.3bn, 230 times more than it's market value, which has sunk to less than £10m.
Despite a string of refinancing deals and a giant emergency cash call, Hibu has been unable to shake off the legacy of it's expansion drive, in which it snapped up big rivals in Spain, America and parts of Latin America.
It's borrowings have fallen from more than £3bn at their peak four years ago, but the interest bill continues to into profits. Last year, it forked out £160m in charges.
The company swung from a small pre-tax profit the previous year to a £1.4bn loss largely because of a huge write-off on it's acquisitions, according to its last set of accounts.
Under Mike Pocock, the chief executive, Hibu has tried to reinvent itself as an onlline listings service and marketplace, connecting the high street with local shoppers. In a last ditch attempt to make a break from it's chequered past, the company made the decision to change its name from Yell to Hibu, a word it admitted was meaningless.
Last year, however, with its loans nearing maturity, lenders lost patience with the slow pace of change at the company, forcing it to draw up a brutal debt restructuring plan. The bulk of the loans are due to mature in 2014.
The lenders are led by a group of six larger funds: Soros Fund Management, the vehicle that manages the investor's billions; Deutche Bank; Gruss; Ares; Alcentra; and GSO, an affiliate of Blackstone, the private equity giant.
The hedge funds replaced a group of high street banks, including HSBC and royal Bank of Scotland, as Hibu's biggest creditors by scooping up their loans at a fraction of their face value.