DBRS Confirms YPG Holdings Inc. at BBB (high), R-1 (low), Pfd-3 (high)

DBRS has today confirmed the Medium-Term Notes, Exchangeable Subordinate Debentures and Preferred Share Ratings of YPG Holdings Inc. (YPG or the Company) at BBB (high), BBB and Pfd-3 (high), respectively. DBRS has also confirmed the short-term rating of YPG at R-1 (low). The trend on all ratings is Stable.

YPG’s ratings remain supported by (1) the Company’s dominance as the incumbent directories publisher in Canada, a position that has been further solidified by its recent acquisition of the Aliant Directories; (2) its directories and vertical media businesses, which continue to generate industry-leading EBITDA margins, and (3) the Company’s stable financial profile.

YPG has demonstrated good EBITDA and cash flow from operations growth following recent acquisitions, with a dedicated focus of its efforts on integration and execution in the directories and vertical media segments. As a result, YPG continues to benefit from improved efficiencies, bundling and cross-selling opportunities.

DBRS notes the Company’s EBITDA is likely to continue to demonstrate good growth in 2007 following the integration of recent acquisitions. Pro forma the Aliant acquisition, DBRS expects EBITDA to improve organically at a rate of between roughly 4% and 7% at the end of the year.

On a year-over-year basis, DBRS expects the Company’s free cash flow to improve as cash flow from operations is expected to continue to increase, offsetting slightly higher capital expenditures in 2007.

Over the medium term, DBRS expects YPG to continue its trend of increasing distributions consistently in a disciplined manner. However, DBRS expects the Company’s payout ratio to continue to decline in preparation for corporate conversion in 2011, at which time DBRS expects the surviving entity to remain a high-dividend-yielding corporation.

YPG’s financial ratios are expected to remain relatively stable in 2007, strengthening modestly through the end of the year primarily as a result of EBITDA and cash flow from operations growth.

DBRS does not expect YPG to aggressively pursue acquisitions in the near term. However, DBRS expects the Company to maintain a disciplined, conservative approach to strategic acquisitions and their respective financings.

Note:
All figures are in Canadian dollars unless otherwise noted.