As I post this the BOD are in discussions with the bankers. If the bankers agree to reorganize the debt,maybe spread it equally for ten years then the stock will move up sharply.
If,and I mean IF they can somehow do a Mortgage type deal,let's say Amortize all debt to 25 years then the monthy payment would be $9 million per month or $108 million per year.With this scenario the common stock would move up to a healthy $5/$6 range and the preferreds would go over $20.
Remember,paying $108 million per year plus $22 million for the C and D preferred shares would be $130 million per year,they were paying about $340 million in dividends for the commons !!
This would allow YLO to to continue to grow the company,get investors' confidence back and can just concentrate on keeping their clients while pursuing new avenues in growing their earnings.
So,an amortazation of debt for 25 years will turn the tables around instantly.
You only forgot to tell us why the banks would agree to reschedule the debt to be paid over 25 years. I can understand them doing it if interest margin was raised by 650-750bps. But then your interest payments would be 80% of your cash flow and there would be no money left to pay principal. Effectively, you would bleed the company to death.
There's no point in YLO also agreeing to such a scenario, which only prolongs their pain. They will not grow in 2012 and 2013 and will most likely not even be able to pay the interest at some point during the next two years.
I think Yellow is priced for recapitalization and dilution, beyond the extent of what will occur with the preferreds being called in March. I'm not sure why the banks would agree to restructure the debt over such a long period, at least, not without the spread Victor mentions below (additional 6.5%-7.5%), and even then, I'm not sure a bank would want to lend to Yellow on such a long term, period. Yellow needs to keep paying down debt as it matures, using the savings from dividends on common, it's a race against revenue decline that Yellow can win, but need to focus available cash on debt and digital media.
Note that Yellow's digital transformation is still slow. In the CC, they only list the % of total revenue coming from digital, which is increasing. The problem with this jaded statistic is that the print revenue is causing an overall decline and online revenue will naturally become a larger percentage of the total. Their goal is to have 50% of revenue come from digital media, well if print revenues decline enough, it will be 50%, however, that's not much of a goal.