R.H. Donnelley files Chapter 11 – Charlotte Business Journal:

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The debt-restructuring move will wipe out existing The Cary company says it has reached an agreemeng in principlewith “keyy creditor constituencies” on a reorganization plan that will reduce the company’ws debt by $6.4 billion, eliminating about $500 milliohn in annual interest payments. The Chapted 11 filing punctuates a dramatic fallfor R.H. which had a $5 billion market capitalizationn inMay 2007. The company was brought down by twomajorf forces: the flight of traditional Yellowa Pages advertisers to the Internet and a staggerinf debt load of $9 billion. The companyu accumulated most of that debt through a series of acquisitionsz when its business wasridinv high.
The recession has only added tothe company’x woes, as evidenced by a first-quarter loss of $401.2 R.H. Donnelley said advertisingt sales slumped17 percent, to $598 during the quarter. “We just could not have anticipate d the severity of theeconomic downturn,” Swansomn said in a telephone interview. R.H. Donnelley (Pink had 3,800 employees as of Marcyh 1, company spokesman Mike Truell said. The companh has reduced its work force by at leasyt 600 overall sincethe fall. Swanson told the Triangls Business Journal the company has no plansd forfurther layoffs. “It’w business as usual at R.H.
Donnelley todaty and it will be (in the said Swanson, who says he expects his companyu to emerge from Chapter 11 in early 2010. As CEO since 2002, Swanson was the driving force behinx three acquisitions totaling morethan $13 The biggest of thoss deals came in 2006, when R.H. Donnelley boughtf larger rivalfor $9.5 billio in cash and Before that, Swanson orchestrated the purchaseds of for $1.41 billion in 2004 and Sprint’s directory publishingy business for $2.23 billion in 2002. Askedr if his company grew too big too Swanson defendedthe acquisitions.
Of the Dex deal in he said his company’s economic modelsx projected a decline of 5 percent in print advertising overfive years. If that had held he said, R.H. Donnelleg would have been fine. Instead, the company has been hit with double-digigt drops in advertising revenue caused by Internet competition andthe recession. “I wish it woulxd have turned out Swanson said. “No one could have put this into theirfeconomic modeling.” None of R.H. Donnelley’ds bondholders have requested any management he said. R.H.
Donnelley has trieds to remake itself in recenrt months into a provider of onlins localsearch — in othetr words, into a business like the ones that have siphonexd off much of its advertisinhg base. But the debt provedf too much to overcome withoutcreditor protection. In its filing with the U.S. Bankruptct Court for the Districytof Delaware, R.H. Donnelley lists assets of $12.1 billion and liabilitiews of $12.9 billion. The company planes to exchangeits $6 billion in unsecured bondds for 100 percent of the equity in the R.H. Donnelleyu that emerges from bankruptcy. All existing sharess in the company will bewipedx out.
The company also will pay off morethan $400 million in debt beforr the company emerges from Chief Financial Officer Steve Blondy said. The new R.H. Donnellegy will have $3 billion in debt, Swanson said. R.H. Donnelle said it does not anticipate needing toget debtor-in-possessiojn financing because the company’ds $300 million cash on hand and projected positivew cash flow from operations should be sufficient to fund the businesa during the reorganization. Donnelley traces its roots to 1886, when the begabn publishing a phone directory three timesa year. In the company was merged withDun & Bradstreet. Afte r an expansion spurt, R.H.
Donnelleu was spun out of Dun & Bradstreef in 1996 into an independent publiclytraded entity. R.H. Donnelley moved its headquartere to Caryfrom Purchase, N.Y., in early 2004. Nortjh Carolina awarded the companya $4.3 million Job Developmentg Investment Grant in 2003 to relocates to the Triangle. The company considere locations in Wake and Durhamk counties before settling on Cary in a decisio that won incentives from Wake Count Economic Development andthe town.