R.H. Donnelley investor believes company can pay debt, not ready for bankruptcy

By Lisa Kerner

Charlotte, N.C., March 24 - Hurricane Capital Global Alpha Fund, LP said it does not believe that R.H. Donnelley Corp. is a bankruptcy case, according to a schedule 13D/A filed with the Securities and Exchange Commission.

"Although the company is loaded down with debt, it not only has the ability to service this debt, but has a cash surplus of over $500,000,000 which it can use to repurchase debt, buy back stock and pay dividends," Hurricane said in a letter to R.H. Donnelley on Monday.

"Although a large amount of debt is coming due over the next three years there is no reason to believe a portion of this debt cannot be rolled over at reasonable rates," said Hurricane.

Companies in worse financial condition that R.H. Donnelley include Hanesbrands Inc., Harley-Davidson, Inc. and Macerich Co., the letter said.

According to Hurricane, R.H. Donnelley should buy back shares "until 80% of the float has been retired or the share price has increased to over $1.00 a share."

R.H. Donnelley can buy back shares using a fraction of its monthly cash flow, Hurricane said.

Hurricane also recommends the company reinstate a dividend of 20% of the cash from operations, or $0.40 a share quarterly before stock buybacks.

Hurricane said it believes R.H. Donnelley's management "must take aggressive steps to correct the misconception that it is in a dying industry" and called the company the "gateway to the internet" for small and medium-sized companies.

"The misperception that R.H. Donnelley is not an internet company is perhaps the biggest problem that it faces," Hurricane said in the letter.

Hurricane is also seeking three seats on the board of directors of the Chicago printing services company "so that management's interests are aligned with those of the business owners."

As previously reported, R.H. Donnelley intended to refinance its debt obligations prior to maturity but believes that may no longer be possible given the state of the capital markets. The company continues to generate liquidity to meet its near-term financial obligations but said it is concerned about larger debt maturities that begin coming due in 2010.

Earlier in the month, R.H. Donnelley announced it hired Lazard Ltd. to help evaluate the company's capital structure.

Doddsville Investments, LLC, general Partner to Hurricane, beneficially owns 7,400,222 shares or 10.8% of R.H. Donnelley's outstanding stock.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.