JPR, Yell and SEAT Pagine Gialle
Watch out equity holders free cash flow won't be around much longer and your equity is going to be pretty much worthless by 2010 if you have any in these companies.
These are all classic examples of companies that are inherently strong businesses gearing up massively on debt which will prove hard to re-finance and not really having that great growth strategies or being able to develop any as they spend all their time looking in the rear view mirror.
I was talking to Paul yesterday about how we should offer to buy Thomson Directories from its Italian owners SEAT Pagine Gialle as a joke I'm not sure we could afford it right now but you never know. The £3.8bn of debt SEAT Pagine Gialle its parent has is crippling it and is sure to make good assets like TDL come onto the market at even lower fire-sale prices later in 2009 and if they don't I am so happy that all our main competitors in the local advertising space are basically at the mercy of the debt markets as well as without much of a clue about online strategy.
Listen to this quote from Tim Bowdler MD of JPR getting all angry about someone accusing him of ruining the business by gearing it up like LCD TV's are going out of fashion: "Most analysts in 2005 were saying we should take on more debt. It is very easy to sit on the sidelines and appear wise after the fact. Back in 2005 nobody was suggesting our strategy was flawed."
There are a lot of responsible business owners who didn't take the route you took Mr Bowdler but now like Yell with it's £5bn debt you and your fellow shareholders are going to be well and truly diluted as the free cash flow you thought would be there forever starts to decline sharply and the bankers come calling.