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R.H. Donnelley Files for Bankruptcy to Reduce Debt

Tuesday, June 02, 2009

Press release from the issuing company

CARY, N.C. -- R.H. Donnelley, one of the nation's leading consumer and business-to-business local commercial search companies, announced that the company and its subsidiaries today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware in order to consummate a balance sheet restructuring.

R.H. Donnelley also announced it has reached an agreement in principle with key creditor constituencies on the terms of a plan of reorganization that proposes to reduce debt by approximately $6.4 billion, eliminate approximately $500 million in annual interest expense and extend the company's bank maturities out to 2014.

Throughout the restructuring process, R.H. Donnelley will be conducting "business as usual" and does not anticipate any interruptions in the services it provides to its more than 500,000 valued customers across the U.S.

R.H. Donnelley anticipates that more than $300 million of cash on hand, as well as projected positive cash flow from operations will be more than sufficient to fund its operations during the restructuring process, and therefore does not plan to seek debtor-in-possession (DIP) financing during the reorganization of its business.

"Our growth-through-acquisition strategy never anticipated the cataclysmic collapse of the U.S. economy and the local advertising market. As a result of these developments, earlier this year we began negotiating with our lenders to restructure our debt and provide the company with a more sustainable capital structure that reflects the current economic realities," said David C. Swanson, chairman and CEO of R.H. Donnelley.

Under the terms of the agreement:

    * R.H. Donnelley would reduce its total debt by approximately $6.4 billion, including about $700 million of secured indebtedness
    * The approximately $6.0 billion of unsecured bond indebtedness would be exchanged for 100 percent of the equity in the restructured company and $300 million of unsecured notes issued by the company; all existing equity in the company would be extinguished
    * Total cash interest expense reduction of approximately $500 million annually
    * Post-restructuring secured and consolidated debt of approximately $3.1 billion and $3.4 billion, respectively, which represents approximately 3.0x and 3.3x net secured and net consolidated leverage, respectively
    * Post-restructuring cash balance of approximately $125 million

R.H. Donnelley filed a variety of customary first day motions with the court to enable it to continue business as usual during the restructuring. These motions include requests to continue paying employee wages and benefits as usual and to continue customer programs and guarantees.

Serving as lead restructuring advisors for R.H. Donnelley are Lazard and Sidley Austin LLP.

More information about today's announcement is available at www.rhd.com. Additionally, the company has set up a toll-free restructuring hotline at 1-866-889-6193.

 

 

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