R.H. Donnelley gets commitment for $1.5 billion loan; $900 million notes

By Sara Rosenberg

New York, Sept. 23 - R.H. Donnelley Inc. has received a "firm commitment" for approximately $2.4 billion in debt financing from Bear Stearns & Co., Deutsche Bank and Salomon Smith Barney for its acquisition of Sprint Corp.'s directory publishing business, company officials said in a conference call Monday. The debt financing is anticipated to consist of $800 to $900 million in high yield bonds and $1.5 billion in bank credit.

The debt financing "would be between six and 10 years in addition to a revolver," officials said. "It will be decent term financing."

Initially, the company anticipates paying an average of 8% in interest expenses. "$800 to $900 million will be issued as fixed-rate securities from day one. The fixed rate we think of in the 10% range. Rates will be determined by the market. If you look at the high yield indexes today, they're in the single digits. For planning purposes we used a higher number," officials explained during the call. "The floating-rate debt would be lower. We'll take about half of the floating rate and fix it in the swap market. Some time in the first three months after closing we'd look to do that."

"There is no specified time for bringing [the bank debt and the bonds] to market," a company spokesperson told Prospect News.

Furthermore, Goldman Sachs Capital Partners 2000, LP has agreed to invest $200 million in the company through the purchase of convertible preferred stock, which will have a conversion price of $24.05 and will carry a dividend of 8%.

Proceeds from the financing will be used to fund the purchase of Sprint's directory publishing business for $2.23 billion in cash and to refinance debt, including the company's existing bonds and about $250 million in bank debt. For the bonds, the company is "more likely to undertake a tender" than to wait until the debt expires next year, officials said in the conference call.

The acquisition is expected to close in the first quarter of 2003, subject to regulatory approval and closing conditions.

"With this transaction, R.H. Donnelley will have a substantially greater revenue and EBITDA base on which to build increased operating margins and improved cash flows, enabling us to quickly reduce acquisition debt levels. Consistent with R.H. Donnelley's philosophy, we will continue to maintain our commitment to financial discipline and to creating value for our shareholders," said Steven M. Blondy, chief financial officer, in a news release.

R.H. Donnelley is a Purchase, N.Y. marketer of yellow pages advertising.

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