Moody's rates Verizon Directories loans Ba2, notes B2

Moody's Investors Service said it assigned Ba3 corporate family and probability-of-default ratings and an SGL-1 speculative grade liquidity rating to Verizon Directories Disposition Corp., Ba2 ratings with loss-given-default assessments of LGD3 (32%) to the company's $250 million revolving credit facility due 2011, $1.515 billion term loan A due 2013 and $4.750 billion term loan B due 2014 and a B2 rating with a loss-given-default assessment of LGD5 (86%) to the company's $2.850 billion senior unsecured notes due 2016.

The outlook is stable.

In August, Verizon Communications, Inc. announced that it intended to spin off its domestic print and Internet yellow pages business. Verizon Directories will use proceeds of the new debt for cash and debt distributions to Verizon Communications totaling $9.115 billion.

The agency said the ratings reflect Verizon Directories' high debt burden, an expectation of relatively modest leverage reduction, the increasing threat posed by competing directory publishers and web-based directory service providers, the recent decline in the company's print product sales and uncertainty concerning its ability to offset this decline through the restoration of its sales force, growth of online advertising sales and further expansion into non-incumbent markets.

The ratings are supported by Verizon Directories' scale and scope as the second-largest U.S. directory publisher, the strong market position conferred by its exclusive 30-year publishing agreement with Verizon Communications as the "official" yellow pages directory within Verizon Communications' incumbent service areas, its strong free cash flow generation, the predictability of its top line, its highly diversified customer and market base and the continuity of existing senior management following the proposed spinoff of the company, Moody's said.

Management expects that its total debt to EBITDA at closing will be 5.6x.

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