Dex Media considering pre-packaged bankruptcy as restructuring option

By Caroline Salls

Pittsburgh, Nov. 6 – Dex Media, Inc. is considering a pre-packaged or pre-negotiated Chapter 11 bankruptcy filing as part of a review of its restructuring or refinancing alternatives, according to a 10-Q filed Friday with the Securities and Exchange Commission.

Dex said it is exploring its debt restructuring, amendment or refinancing alternatives because it lacks the cash flow from operations to fully pay its senior secured credit facilities and senior subordinated notes in the event of a default or maturity.

The company appointed D.J. Hede of Alvarez & Marsal North America, LLC as its chief restructuring officer on Oct. 12.

In addition to the options being explored, Dex said it may complete additional debt or equity offerings in advance of its debt coming due.

If it is unable to achieve a pre-packaged or pre-negotiated plan of reorganization, the company said it may be forced to file a regular Chapter bankruptcy case.

As previously reported, Dex entered into a forbearance agreement on Oct. 30 with some of its lenders and lender agents under which the lenders and agents agreed not to exercise their rights related to the company’s potential failure to comply with the maximum leverage and interest coverage ratios for the quarter ended Sept. 30 and its failure to make an interest payment due Sept. 30 on its subordinated notes.

In connection with entering into the forbearance agreement, Dex said it received a term sheet and accompanying restructuring support agreement from the steering committee of an informal group of lenders that hold more than 50% of credit agreement claims.

Dex and its advisers are in negotiations with the steering committee regarding the support agreement and restructuring term sheet, with a goal of agreeing on the terms of a consensual restructuring, according to the 10-Q.

Because the default related to the missed subordinated notes payment was not cured for a period of 30 days, the company said nonpayment constitutes an event of default, and the notes trustee declared the senior subordinated notes to be immediately due and payable on Nov. 2.

Dex said the notes acceleration triggered cross-defaults under the credit agreement. On Nov. 4, the lender agents elected to enforce a 179-day payment blockage in connection with the senior subordinated notes.

As a result of the cross-defaults and the risk that the company may not be in compliance with its financial covenants in the fourth quarter of 2015 and in 2016 for any or all of the senior secured credit facilities, Dex said its total outstanding debt of $2,298,000,000 has been classified as current maturities of long-term debt as of Sept. 30.

Dex is a Dallas-based full-service media company.

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