Dex One, SuperMedia to amend credit facilities as part of merger

By Lisa Kerner

Charlotte, N.C., Aug. 21 - Dex One Corp. and SuperMedia Inc. will amend existing credit agreements as a condition of closing their stock-for-stock merger of equals, SuperMedia president and chief executive officer Peter McDonald said during a conference call on Tuesday.

The extension of credit agreements through 2016 will allow time for the combined company to retire debt and grow revenue.

Information about the proposed amendments will be filed with the Securities and Exchange Commission, after which SuperMedia will meet with lenders.

McDonald said the company is "mindful" of the change of control for its bonds. A process is in place to protect that, he said, so the company doesn't inadvertently lose some tax assets.

The entire $1.8 billion of tax attributes, including $1.1 billion of net operating loss carry-forwards, are expected to be preserved and to be available to offset income and generate cash flow, Dex One CEO Alfred Mockett said on the call.

Debt repayment

At the end of the second quarter, Dex One's debt was $2 billion, and SuperMedia's was $1.4 billion, said Mockett.

"With improved cash flow from operating synergies and the use of tax attributes, the new company will be better positioned to retire debt and strengthen the balance sheet," Mockett said.

Additional financials will be provided "in due course," executives said.

Expected benefits from the transaction include $150 million to $175 million of annual run rate cost synergies by 2015 as well as enhanced cash flow.

Transaction details

The merger has been approved by the companies' respective boards of directors.

Under the terms of the agreement, Dex One and SuperMedia shareholders will exchange their shares for shares in the new company, Dex Media. Dex One shareholders will receive 0.2 share for each Dex One share they own, and Super Media shareholders will receive 0.4386 share for each SuperMedia share they own.

Dex One shareholders are expected to own about 60% and SuperMedia shareholders are expected to own about 40% of the combined company once the transaction closes, which is expected to occur in the fourth quarter.

Dex Media will be led by Alan Schultz as chairman and McDonald. Mockett will lead Dex One through the transaction's close and then step down.

Dex One is a Cary, N.C.-based marketing services provider.

SuperMedia is a Dallas-based directory publisher.

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