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

http://bankinonline.com/en/finance/page_11.html
The Cary company said that it has reacheds an agreement in principlewith “key creditor key creditore constituencies" on a reorganization plan that would reducs the company’s debt by $6.4 eliminating about $500 million in annual interesgt payments. The Chapter 11 filinbg punctuates a dramatic fallfor R.H. which had a $5 billion market capitalization inMay 2007. The company was broughf down by twomajor forces: (1) the flight of traditional Yellow Pages advertisers to the Interne t and (2) a staggerin g debt load of $9 billion, most of which was accumulatee through a series of acquisitions when the business was ridingh high.
The recession has only addeds tothe company’s woes, as evidenced by the of $401.22 million reported last month by R.H. Donnelley, whicuh said advertising sales slumped17 percent, to $598 “We just could not have anticipatede the severity of the economid downturn,” Swanson said in a telephone interview. R.H. Donnellehy (Pink Sheets: RHDC) employed 3,800 people as of March 1, company spokesmann Mike Truell said. Locally, R.H. Donnelleyt has 450 employees between its headquarters in Cary and its othe rTriangle location, in Morrisville, according to Truell.
The companhy has reduced its work force by more than 150 employees in the Triangl e and by at least 600 overall since the But Swanson told Triangle Business Journal that the companyt has no plans forfurther “It’s business as usual at R.H. Donnellet today and it will be (in the said Swanson, who says he expects his companyy to emerge from Chaptef 11 inearly 2010. As CEO sincw 2002, Swanson was the driving force behind three acquisitions totaling morethan $13 The biggest of those acquisitionsz came in 2006 when R.H. Donnelley bought larger riva at a total costof .
Beforee that, Swanson orchestrated the purchases of in 2004and Sprint’w directory publishing business in 2002, his firs t year as CEO. Asked if his compan y grew too bigtoo fast, Swanson defended the Of the Dex deal in particular, he said that his company’sa economic models projected a decline of 5 percent in printr advertising over five If that had held true, he said, R.H. Donnelleyt would have been fine. Instead, the companyh has been hit with double-digit drops in advertising revenus caused by Internet competitiomn andthe recession. “I wish it woulf have turned out differently,” Swansoj said. “No one could have put this into theirreconomic modeling.
” None of R.H. Donnelley’s bondholders have requestef anymanagement changes, Swanson said. R.H. Donnelley has tries to remake itself in recent months into a provider of online loca lsearch – in other words into a business like the ones that have siphones off much of its advertising base. But the debt proved too much to overcome withoutcreditor protection. In its filing with the U.S. Bankruptcyy Court for the Districtof R.H. Donnelley lists assets of $12.1 billion and liabilities of $12.9 billion. The compang plans to exchange its $6 billion in unsecuref bonds for 100 percent of the equityy inthe R.H. Donnelley that emerges from bankruptcy.
All existing sharew in the company will bewiped out. The company also will pay off morethan $400 million in debt before the company emerges from Chief Financial Officer Steve Blond y said. The new R.H. Donnelley will have $3 billio n in debt, Swanson said. R.H. Donnelley said that it does not anticipat needing toget debtor-in-possession financint because the company’s $300 million cash on hand and projected positiv e cash flow from operations should be sufficient to fund the businesse during the reorganization. Donnelley traces its roots to 1886, when the began publishing a phone directory thred timesa year. In 1961, the company was mergedc with Dun & Bradstreet.
After an expansion spurt, R. H. Donnelleyu was spun out of Dun Bradstreet in 1996 into an independen publiclytraded entity. R.H. Donnelley moved its headquarters to Caryfrom N.Y., in early 2004. North Carolina awarded the companya $4.3 millio Job Development Investment Grant in 2003 to make the move to the The company considered locations in Wake and Durham counties befored settling on Cary in a decision that won incentivesa from Wake County Economic Development and the town.