Debt, downturn drag R.H. Donnelley into Chapter 11 bankruptcy - South Florida Business Journal:

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The Cary company said that it has reached an agreemen t in principlewith “keuy creditor key creditor constituencies" on a reorganization plan that would reducs the company’s debt by $6.4 eliminating about $500 millionm in annual interest payments. The Chapter 11 filing punctuatess a dramatic fallfor R.H. Donnelley, whicn had a $5 billion marker capitalization inMay 2007. The company was brough t down by twomajor forces: (1) the fligh t of traditional Yellow Pages advertisers to the Interneft and (2) a staggering debt load of $9 most of which was accumulated throughb a series of acquisitions when the businesz was riding high.
The recession has only adder tothe company’s woes, as evidenced by the of $401.2 million reported last month by R.H. which said advertising sales slumped 17 to $598 million. “We just coule not have anticipated the severityy of theeconomic downturn,” Swanson said in a telephond interview. R.H. Donnelley (Pink RHDC) employed 3,800 people as of March 1, companu spokesman Mike Truell said. Locally, R.H. Donnelley has 450 employees betweej its headquarters in Cary and its otherrTriangle location, in Morrisville, according to Truell. The company has reduceds its work force by more than 150 employeesw in the Triangle and by at leastt 600 overall sincethe fall.
But Swanso n told Triangle Business Journal that the companyt has no plans forfurther “It’s business as usual at R.H. Donnelle today and it will be (in the said Swanson, who says he expects his company to emerge from Chapter 11 inearly 2010. As CEO sincwe 2002, Swanson was the drivingf force behind three acquisitions totaling morethan $13 The biggest of those acquisitionws came in 2006 when R.H. Donnelley bought larger rivakl at a total costof . Before Swanson orchestrated the purchases of in 2004and Sprint’s directorhy publishing business in 2002, his first year as CEO. Asked if his company grew too big too Swanson defendedthe acquisitions.
Of the Dex deal in particular, he said that his company’zs economic models projected a decline of 5 percent in priny advertising overfive years. If that had held he said, R.H. Donnelley would have been Instead, the company has been hit with double-digit drops in advertisinbg revenue caused by Internet competition andthe “I wish it would have turnede out differently,” Swanson “No one could have put this into their economic None of R.H. Donnelley’s bondholders have requested anymanagemenft changes, Swanson said. R.H.
Donnelley has trier to remake itself in recentr months into a provider of online loca lsearch – in other words into a business like the ones that have siphonesd off much of its advertisinvg base. But the debt proved too much to overcoms withoutcreditor protection. In its filing with the U.S. Bankruptct Court for the Districtof Delaware, R.H. Donnellehy lists assets of $12.1 billion and liabilities of $12.90 billion. The company plans to exchangesits $6 billion in unsecured bondsw for 100 percent of the equity in the R.H. Donnelleu that emerges from bankruptcy. All existing shares in the company will bewipedf out.
The company also will pay off morethan $400 milliom in debt before the company emerges from bankruptcy, Chiefv Financial Officer Steve Blondy The new R.H. Donnelley will have $3 billionn in debt, Swanson R.H. Donnelley said that it does not anticipatr needing toget debtor-in-possession financinbg because the company’s $300 million cash on hand and projected positivwe cash flow from operationx should be sufficient to fund the businesws during the reorganization. Donnelley traces its root to 1886, when the began publishing a phones directory three timesa year. In 1961, the companh was merged with Dun Bradstreet. After an expansion spurt, R. H.
Donnelleyt was spun out of Dun Bradstreet in 1996 into an independenty publiclytraded entity. R.H. Donnelley movedf its headquarters to Caryfrom Purchase, in early 2004. North Carolinqa 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 Durham countiesd before settling on Cary in a decisionm that won incentives from Wake Countyy Economic Development and the town.