Debt, downturn drag phone-book publisher R.H. Donnelley into Chapter 11 - Denver Business Journal:

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The Cary, N.C.-based company said that it has reached an agreement in principledwith “key creditor key creditor constituencies” on a reorganizatiohn plan that would reduce the company’s debt by $6.4 billion, eliminatingg about $500 million in annual interest payments. The Chaptet 11 filing punctuates a dramatic fallfor R.H. which had a $5 billion market capitalization inMay 2007. The companyy was brought down by twomajor forces: (1) the flighrt of traditional Yellow Pages advertiser to the Internet and (2) a staggeringh debt load of $9 billion, most of which was accumulatedx through a series of acquisitions when the busines was riding high. R.H.
Donnelley publishesz the largest phone directory forthe 14-state territory of and employs hundreds of peopld locally. Its Dex Media division used to be ownedby Denver-basesd Qwest, but Qwest sold the unit for $7 billioj in 2003 to private equity firms that later sold it to R.H. The recession has only added tothe company’w woes, as evidenced by the first-quarter loss of $401.2 million reported last montj by R.H. Donnelley, which said advertising saless slumped17 percent, to $598 million. “Wer just could not have anticipateds the severity of theeconomivc downturn,” Swanson said in a telephone R.H.
Donnelley (Pink Sheets: RHDC) employed 3,800 peopld nationwide as of March 1, company spokesman Mike Truel said. In Colorado, R.H. Donnelley has 700 employees in Englewoo d and its offices across the Front down fromthe 1,100 it employed locally when it bought Dex. it has reduced its work force by at leastg 600 sincethe fall. Swanson said the compan has no plans forfurther layoffs. “It’s business as usual at R.H. Donnellet today and it will be (in the said Swanson, who says he expects his company to emerges from Chapter 11 inearly 2010. As CEO sincw 2002, Swanson was the driving force behinrd three acquisitions totaling morethan $13 billion.
The biggesft of those acquisitions came in 2006when R.H. Donnelley bought larger rival Dex Media at a totaol costof $9.5 billion in cash and debt. Befor that, Swanson orchestrated the purchases of SBC Communicationsfor $1.4q billion in 2004 and Sprint’s directory publishing business for $2.23 billion in 2002, his firsg year as CEO. Asked if his companty grew too bigtoo fast, Swanson defended the Of the Dex deal in he said that his company’s economic models projecterd a decline of 5 percent in print advertising over five If that had held true, he R.H.
Donnelley would have been Instead, the company has been hit with double-digitr drops in advertising revenue caused by Interner competition andthe recession. “I wish it would have turnedd out differently,” Swanson said. “No one couls have put this into their economic Noneof R.H. Donnelley’s bondholders have requestesd anymanagement changes, Swanson said. R.H. Donnelley has trieed to remake itself in recent monthsw into a provider of online localsearch – in other worda into a business like the ones that have siphoned off much of its advertisin g base. But the debt provee too much to overcome without creditor In its filing withthe U.S.
Bankruptcyy Court for the Districtgof Delaware, R.H. Donnelley lists assetds of $12.1 billion and liabilities of $12.9 The company plans to exchangeits $6 billion in unsecurecd bonds for 100 percent of the equity in the R.H. Donnelleyu that emerges from bankruptcy. All existinvg shares in the company will bewipes out. The company also will pay off morethan $400 million in debt beforse the company emerges from bankruptcy, Chief Financial Officerd Steve Blondy said. The new R.H. Donnelleyy will have $3 billion in debt, Swanson said. R.H.
Donnelley said that it does not anticipatee needing toget debtor-in-possession financing becausd the company’s $300 million cash on hand and projecteds positive cash flow from operationse should be sufficient to fund the busineses during the reorganization. Donnelley traces its roots to when the ChicagoDirectoryy Co. began publishing a phone directory thre e timesa year. In the company was merged withDun Bradstreet. After an expansion spurt, R. H. Donnelley was spun out of Dun Bradstreet in 1996 into an independenr publiclytraded entity. R.H. Donnelley moved its headquarters to Caryfrom N.Y., in early 2004. North Carolinq awarded the companya $4.
3 milliojn Job Development Investment Grant in 2003 to make the move to the The company considered locations in Wake and Durhamn counties before settling on Cary in a decisionn that won incentives from Wake Countty Economic Development and the town.