Lenders are taking control of the UK-based directory company Hibu and converting much of its GBP2.3 billion in debt into equity. This action wasn’t unexpected. A series of debt restructurings failed to buy Hibu enough runway to transform the business into a sustainable local digital media and services provider. The move will take Hibu off the public markets and essentially wipe out shareholders. The company’s shares were trading at 0.17 on Thursday.

Hibu has operations in the UK, United States, Spain and South America (Argentina, Chile and Peru). The business has struggled under the weight of its debt as revenue declines have accelerated, particularly in the UK and Spain. In 2010, Hibu brought in Mike Pocock as CEO to replace the retiring John  Condron. Pocock and his team built a strategy based on offering digital marketing and e-commerce services to SMBs and gaining scale through self-service. The strategy hasn’t taken hold fast enough to offset traditional revenue losses.

For the financial year ending March 31, 2013, Hibu saw its group revenue fall by 16 percent to GBP 1,347 million. Print revenue was down 22 percent and “digital directories” (online and mobile Yellow Pages) fell by 12 percent. The bright spot in the Hibu business is digital services, which is the key to the company’s hopes for a return to growth. Digital services grew by 34 percent, but at GBP174 million, this represents just 13 percent of total revenue. Digital services is essentially a catch all category for all non-Yellow branded products (websites, SEM, etc.).

Customer losses have been significant for Hibu year over year. For the 2013 financial year, the company lost 162,000 print advertisers, leaving it with 868,000. The digital directory customer base declined by 98,000, while digital services gained 114,000 customers. Another silver lining is that digital services customers have a higher average revenue per customer than digital directories, GBP437 vs. GBP338.

The big unanswered question is what happens to Hibu after the lender takeover (which is subject to the approval of 75 percent of the debt holders)? The company has 12,000 employees worldwide. Some efforts to trim cost seem likely, along with a review of the company’s overall strategy and local operations. At this stage it is unclear whether there will be any changes to the company leadership or any consideration given to divesting any of the individual operating units.