Structure, price talk surface on R.H. Donnelley $2.6425 billion credit facility ahead of Tuesday launch

By Sara Rosenberg

New York, July 30 - R.H. Donnelley's $2.6425 billion credit facility emerged with structure and price talk as the syndicate gears up for the Tuesday bank meeting that will launch the deal into syndication.

The facility consists of a $175 million revolving credit facility with an interest rate of Libor plus 200 basis points and an undrawn fee of 37.5 basis points, a $499.5 million term loan A with an interest rate of Libor plus 200 basis points and a $1.968 billion term loan B with price talk of Libor plus 225 basis points, a market source said.

The revolver is expected to be undrawn at closing.

JPMorgan and Bear Stearns are the lead banks on the equally underwritten deal, with JPMorgan listed on the left.

Proceeds from the term loans will be used to fund the acquisition of SBC Communications Inc.'s directory publishing business in Illinois and Northwest Indiana for $1.42 billion in cash. The transaction is expected to close in the third quarter subject to regulatory approval and certain closing conditions.

Basically, the company will gain $1.45 billion in incremental bank debt, extending the maturity of the term loan A and the term loan B by one year each, decreasing pricing on the term loan A to Libor plus 200 basis points from Libor plus 225 basis points and removing the fixed-charges covenant that is found in the existing credit agreement.

The new credit agreement will contain three covenants of senior leverage, total leverage and interest coverage.

R.H. Donnelley expects to have pro forma 2004 consolidated adjusted revenue of about $1 billion and EBITDA of about $586 million following the transaction, assuming a Jan. 1 close.

Total leverage immediately following the transaction will be about 5.8x pro forma adjusted 2004 EBITDA.

The company opted to use bank debt instead of bond debt to finance the acquisition because of the lower cost and the ability to prepay without penalties, company officials explained in a conference call Thursday.

R.H. Donnelley is a Cary, N.C., yellow pages publisher and directional media company.

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