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Yell calls in the banks to renegotiate company convenants

While just 3 months ago we were being told that all was going well at yellow pages group Yell, it seems to be a very different picture today as the group battles to reduce its near £4 billion debt pile. Despite assurances that the company had sufficient cash flow to service its debts we now hear that the group is on the verge of breaking its banking covenants - although an agreement has been reached in principle to relax the current terms.

However, the banks are now calling the shots and will want increased charges in order to renegotiate the debt pile. It has also been announced that the company has suspended payment of its forthcoming dividend as it looks to retain as much cash as possible - a sure fire example that the banks are already putting the squeeze on the group.

The truth is that many analysts in the City have been very wary of Yell's massive debt mountain for some time and the aggressive expansion phase it started a few years ago. This has now come back to haunt the company and it will take some time to get the group back on an even keel.

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