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Linklaters given a tough UK legal job as it advises on Hibu debt restructuring

Posted by: Laurence Simons 07/09/12

Here is a hypothetical business model, let's see if it works: hand out books to people, the thickness of door stops, once a year, every year. For free. You pay people to distribute these books. Nobody ever reads these books. The niche usage such books once had has since been superseded by the whole internet thing.

Only, wait, no: this is not hypothetical, it is real life. It's what firms like Thomsons, and BT and the big daddy of telephone directories, Yellow Pages, did for years, even after all the information became available online. And now, companies like Hibu - formerly Yell, formerly Yellow Paleges - are saddled with about £2.2 billion worth of debt. Takeaway lesson: you cannot hand out thousand-page books to people for like 30 straight years and get away with it. Are you crazy?

Anyway, with Hibu lumbered with such substantial debts, it needs to find a way to restructure it. And that's where they make the call for those in legal jobs, to come look at their finances and tut and then sit them down and sort it out.

The firm hand-picked to do the looking and tutting and sitting down and sorting is Magic Circle giant Linklaters, announced by Legal Week today (September 6th) as winning the lead advisory role in Hibu's debt restructuring talks. A committee of lenders will play host to City banking partners Chris Howard, Bruce Bell and Yen Sum as they all work to a solution that will keep Hibu out of the hands of creditors.

But this isn't the first attempt Hibu has made to stay out of the red. The firm previously held Herbert Smith in an advisory role as the business tried to drum up £500 million of finance, but after being warned by credit agency Moody's that almost half of the debts needed to be written off, the firm was forced to make a change in tack. With reports suggesting lenders would take control of Hibu if this wasn't all on the way to being sorted by March 2013, Linklaters certainly has a job on its hands.

Weirdly, this deal isn't the only thing Linklaters has plucked from the hands of Herbert Smith this week, as regulatory heavyweight Martyn Hopper makes a high-profile transfer to the Magic Circle firm. The former Financial Services Authority adviser joined Herbert Smith in 2004, soon spearheading a number of high-profile investigations into UK top ten outfits including Shell. His acquisition marks a coup for Linklaters, which has floundered behind rival firms when it comes to contentious regulatory capability.