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DBRS said Montreal-based Yellow Media could have further downgrades.Graham Hughes/The Canadian Press

Rating agency DBRS is downgrading directories publisher Yellow Media to triple-C from a low B, saying the decline in its print revenues is continuing and the Montreal company could have further downgrades.

DBRS said Tuesday that Yellow Media's first-quarter results support its view.

"The decline in Yellow Media's print revenue continues and is expected to be even more rapid and enduring than previously anticipated," DBRS said in a news release.

"The negative trend reflects the likelihood that Yellow Media's ratings will be further downgraded with the passage of time, or in the event that the company pursues some form of recapitalization."

Like many companies in the communications and publishing sector, Yellow Pages has been hit hard by changes in consumer behaviour as Internet services dominate the information world.

Fewer Canadians are opening up traditional phone books to look up numbers and advertising revenues that underpin that industry are increasingly harder to generate.

The company is streamlining its print operations to improve its financial position as the publisher of the Yellow Pages directories continues its transformation to an Internet company.

But DBRS noted that Yellow Media's unsecured debt continues to have average recovery prospects, while its subordinated debt has poor recovery prospects.

The reduced expectations for revenue, operating income and cash flow, combined with the company's first scheduled debt maturity in February, 2013, leads DBRS to believe that Yellow Media's financing activities in 2012 likely will involve some form of compromise for existing creditors, DBRS said.

DBRS said it downgraded Yellow Media's issuer rating to triple-C from a low B; its medium-term notes rating to triple-C from a low B, and its exchangeable subordinated debentures to a high double-C from triple-C.

The company recently reported a first-quarter loss of $2.9-billion and wrote down the value of its assets by about $3-billion.