S&P puts Yell Group on negative watch

Standard & Poor's said it placed Yell Group plc's BB long-term corporate credit rating and B+ senior unsecured debt rating on CreditWatch with negative implications following Yell's announcement of its agreement to buy Telefónica SA's 59.9% stake in subsidiary Telefónica Publicidad e Información SA ("TPI") and its plan to launch a tender offer for the remaining TPI shares listed on the Madrid stock exchange. Including assumed debt, the total consideration is roughly £2.1 billion, or about 15x TPI's EBITDA.

The negative CreditWatch implications reflect the expected material increase in Yell's leverage as a result of the acquisitions, to a level that might no longer be in line with the current BB rating, the agency said. The deal also highlights a more aggressive financial policy.

That said, S&P expects TPI to enhance Yell's geographic diversity and its access to markets offering superior growth prospects and better competitive landscapes than those of its key U.K. and U.S. markets.

Pro forma for the acquisition, Yell's lease-adjusted total debt to EBITDA should be more than 6x for the 12 months ended Dec. 31.

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