R.H. Donnelley announces refinancing plan to eliminate debt maturities, covenant uncertainties

By Jennifer Lanning Drey

Portland, Ore., May 8 - R.H. Donnelley Corp. launched a three-part refinancing plan aimed at eliminating near-term debt maturities and enhancing operating flexibility over the next few years, David Swanson, chief executive officer of R.H. Donnelley, said during the company's first-quarter earnings conference call held Thursday.

"Though final details remain subject to market conditions, as a result of these transactions, we expect our total debt balance to decline," Steve Blondy, chief financial officer of R.H. Donnelley, said during the call.

Under the refinancing, R.H. Donnelley has offered to exchange new senior unsecured notes for a portion of its 6 7/8% senior notes due 2013, 6 7/8% series A-1 senior discount notes due 2013, 6 7/8% series A-2 senior discount notes due 2013, 8 7/8% series A-3 senior notes due 2016 and 8 7/8% series A-4 senior notes due 2017.

Also as part of the refinancing, R.H. Donnelley extended Dex West bank debt previously scheduled to mature in 2009 to 2015. Additionally, the company amended the R.H. Donnelley Inc. credit agreement to extend the maturity of the revolver and enhance covenant flexibility by accommodating additional unsecured debt.

The refinancing is a piece of the company's three-part plan for responding to cyclical and operational challenges that have resulted from lower advertising revenues.

Also under the plan, R.H. Donnelley is also looking to achieve at least $30 million of cost savings in 2008 and continuing to invest in its interactive products and strategies.

$74 million net debt reduction

R.H. Donnelley reported first-quarter adjusted free cash flow of $92 million, which the company used to reduce net debt by $74 million during the quarter. The company's net debt balance at the end of the quarter was $9.95 billion, representing 6.9 times leverage.

The company had $365 million available under its revolving credit facility at quarter end and cash and cash equivalents of $29.9 million.

For the quarter, R.H. Donnelley reported adjusted EBITDA of $357 million on net revenues of $675 million.

"While first-quarter sales results reflected some cyclical economic pressures, EBITDA and cash flow came in as planned," Swanson said.

Advertising sales for the quarter were $718 million, down 4.8% from pro forma advertising sales for the same period in the prior year, as regional softness has spread to include nearly all regions where R.H. Donnelley operates, he said.

R.H. Donnelley is a Yellow Pages and online local commercial search company based in Cary, N.C.

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