$HIBU.L – Hibu – a little update

I’ve not looked at former yellow pages owner Hibu for a long time, figuring that the game is over. I thought I’d provide a little update, seeings as there still appears to be some interest in it.

Hibu’s move to digital seems to be meeting with mixed results. The Moonfruit site, which lets you build websites and shops, is one such move. Online sites seem a very crowded space to me, with no barrier to entries. There is some “stickiness” to them, though. The fact that Moonfruit offers a site for free speaks volumes about the
competitiveness in the field. I have also seen what I am fairly sure is a Moonfruit site – although I would like to refrain from specifics – and my conclusion is that they are likely to be “quirky”. I’m worried about the technical solution that they’re adopting. Just my opinion, of course.

There is a a Hibu Shareholders Group, http://hs-group.net/, that is seeking redress against the company/directors, presumably on the basis of a breach of fiduciary duty by the directors –
although the site doesn’t actually state its purpose. In a restructuring update issued on 25 July 2013, http://is.gd/FPcdzJ, it was announced that current holders will be wiped out, with current debt holders receiving equity in the restructured group. The deal is subject to the approval of lenders holding 75% of the Group’s debt. I’m not aware of the outcome, but it’s probably the best that debt-holders can expect.

Whilst I am not a lawyer, my gut feeling is that any action by the Hibu Shareholders Group will fail, and that they are likely to be pouring good money after bad. Breaches of directors’ duties is notoriously difficult to prove, and the burden is on the plaintiff.

It would also appear that shareholders do not have a prima facie case against the directors. The Out-Law website states
(http://www.out-law.com/page-8207): “A director owes their duties direct to the company, and only the company can complain of any breach. Shareholders have no right to claim against a director for any loss they believe they may have suffered as a result of breach of duty. However much their shares have dropped in price, they cannot recover that loss of value from the directors they hold responsible.”

It should be noted that the directors had warned in the past that the shares were likely to be of no value. Also, the shear burden of debt that the company faced, coupled with breaches of covenant, meant that the shareholders were going to meet with an unhappy ending regardless of the directors actions.

I’m sorry to have to mention this, because I know that it is likely to stir up many bad feelings amongst the aggrieved. It looks like it’s time to move on, though. Sorry guys.

Edit 11:58: I just noticed that there is an article on getreading, dated today, that an action’s success is not out of the question: “HSG [Hibu Shareholders Group] has engaged the services of Barry Dearing, who successfully campaigned on behalf of shareholders of West Yorkshire-based loans company Cattles last year. … Mr Dearing helped secure a £16 million payout for shareholders of Cattles who refused a 1p per share compensation payment from the firm.”

 

Update 19:58: I was tweeted earlier by   @HibuShareholders who pointed out the following: “thoughts why #hibu hiring 500 jobs + ad campaign ? Yet are constantly described as collapsed ? Banks got a good deal I think“. The real value of the Hibu was probably as a special situation in distressed debt. Hibu seems to generate around £300m in free cashflow (although the latest reports show around £235m). I seem to recall that debt was trading at about 30% of par. Net debt seems around the £2b mark, so if a hedge fund was able to acquire the debt at those levels, they would effectively be paying less than 3X cashflow. I’m sure they’d be delighted with that. With the recent hiring, there’s even a possibility of a turnaround in the business. It’s all ballpark figures of course, and I daresay there would be many willing to dispute the numbers. Many of the debt-holders would have lost out, of course, having sold the debt at below par.

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About mcturra2000

Computer programmer living in Scotland.
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3 Responses to $HIBU.L – Hibu – a little update

  1. W says:

    Hi, I have followed your blogs with interest and have recently followed you on twitter.
    I was particularly interested in your blog Hibu going concern for stockopedia ? Hope it was yours ?
    I can safely say there is a lot more too this story than is being revealed by the media. It is not just a question of the group feeling the directors are at fault, there are some well documented legal issues to be revealed. The group has a large number of MP’s who also have concerns and whom have themselves been in touch with the FCA, BIS, companies house etc. We are still awaiting a response from Vince Cable. You can find more information at http://www.hibu-shareholders-group.com including some of the EGM questions.
    If you need any more information please feel free to get in touch

    • mcturra2000 says:

      Greetings. I can confirm that I have been blogging about HIBU over on Stockopedia.

      I wish you all the luck with your endeavours, and it will be interesting to see what details emerge from any investigations.

  2. mcturra2000 says:

    Computational mistake on my part: the £235m I mentioned is after deducting interest payments. In a D4E swap, the debt-holders will get to keep the interest. In other words, the free cashflow would be better than I said it was.

    I want to emphasise that I don’t think there is any foul play on management’s part – I think that Hibu is just a case of a company taking on too much debt.

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