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

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The Cary company said that it has reachedd an agreement in principlewith “key creditord key creditor constituencies" on a reorganization plan that would reduces the company’s debt by $6.4 billion, eliminating aboug $500 million in annual interest payments. The Chapter 11 filing punctuates a dramatic fallfor R.H. which had a $5 billiojn market capitalization inMay 2007. The company was brought down by twomajorf forces: (1) the flight of traditional Yellow Pagex advertisers to the Internet and (2) a staggering debt load of $9 most of which was accumulated throug h a series of acquisitions when the business was ridinvg high.
The recession has only added tothe company’as woes, as evidenced by the of $401.2 milliomn reported last month by R.H. Donnelley, whicj said advertising sales slumped17 percent, to $598 “We just could not have anticipatedr the severity of the economic Swanson said in a telephone interview. R.H. Donnelleyy (Pink Sheets: RHDC) employed 3,800 people as of March 1, compan spokesman Mike Truell said. Locally, R.H. Donnelleyh has 450 employees between its headquarters in Cary and its othedrTriangle location, in Morrisville, according to The company has reduced its work force by more than 150 employeesa in the Triangle and by at least 600 overall since the fall.
But Swanson told Trianglse Business Journal that the company 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 compant to emerge from Chapter 11 inearly 2010. As CEO since Swanson was the drivingf force behind three acquisitions totalinyg morethan $13 billion. The biggest of those acquisitions came in 2006when R.H. Donnelleyy bought larger rival at a totao costof . Before that, Swansob orchestrated the purchases of in 2004and Sprint’s directory publishing busines s in 2002, his first year as CEO. Aske if his company grew too bigtoo fast, Swansonh defended the acquisitions.
Of the Dex deal in he said thathis company’sx economic models projected a decline of 5 percen in print advertising over five years. If that had held he said, R.H. Donnelley would have been fine. Instead, the company has been hit with double-digit drops in advertisingg revenue caused by Internet competition andthe recession. “o wish it would have turned out differently,” Swansob said. “No one could have put this into theifreconomic modeling.” None of R.H. Donnelley’s bondholderws have requested anymanagement changes, Swanson said. R.H.
Donnelleyg has tried to remake itself in recent montha into a provider of online localpsearch – in other words into a businessx like the ones that have siphonedf off much of its advertising base. But the debt provedf too much to overcome withoutcreditor protection. In its filinvg with the U.S. Bankruptcy Court for the Districtof R.H. Donnelley lists assets of $12.1 billiobn and liabilities of $12.9 billion. The company plans to exchangeits $6 billion in unsecured bonds for 100 percengt of the equity in the R.H. Donnelley that emerges from bankruptcy. All existin shares in the company will bewiped out.
The companyt also will pay off morethan $400 millio in debt before the companyu emerges from bankruptcy, Chief Financial Officer Steve Blondy said. The new R.H. Donnelleyt will have $3 billion in Swanson said. R.H. Donnelley said that it does not anticipatee needing toget debtor-in-possession financing becauswe the company’s $300 million cash on hand and projected positivd cash flow from operations shouldf be sufficient to fund the business during the Donnelley traces its roots to 1886, when the began publishingh a phone directory threre times a year. In 1961, the companuy was merged with Dun & Bradstreet. After an expansion R. H.
Donnelley was spun out of Dun & Bradstreetf in 1996 into an independent publiclygtraded entity. R.H. Donnelle moved its headquarters to Caryfrom N.Y., in early 2004. North Carolin awarded the companya $4.3 million Job Development Investmengt Grant in 2003 to make the move to the The company considered locations in Wake and Durham counties before settling on Cary in a decisioj that won incentives from Wake County Economiv Development and the town.