Moody's rates R.H. Donnelley loan

Moody's Investors Service said it assigned a Ba3 rating to R.H. Donnelley's proposed $2.6 billion of senior secured bank credit facilities, which include a $175 million senior secured revolving credit facility, $499 million senior secured tranche A term loan, and $1.968 billion senior secured tranche B term loan facility.

Additionally, Moody's raised the rating for R.H. Donnelley's existing $325 million issuance of 8 7/8% senior notes due 2010 to Ba3 from B1, as they now benefit from the same security interest that the new bank group is receiving. The B2 rating for the existing senior subordinated notes was confirmed, and the outlook is stable.

Moody's said the ratings reflect the company's high leverage (which is worsened by the proposed APIL acquisition), the challenges involved in turning around APIL's declining top line, the risk of further acquisition activity, the limited growth prospects of the directory business, and the likelihood of heightened competition over time within all of Donnelley's markets.

However, the ratings are supported by R.H. Donnelley's strong market position, as the "official" directory; the diversification of its customer and asset base; and its dependable revenues and strong cash flow generation, which provide the opportunity for significant organic deleveraging in fairly short order, absent further acquisitions.

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