News Column

Dex One, SuperMedia Merger Hinges on Bankruptcy

March 18, 2013

David Ranii, The News & Observer (Raleigh, N.C.)

Cary yellow pages publisher Dex One and Texas-based SuperMedia have filed "pre-packaged" bankruptcy plans in order to move ahead with their merger.

The two companies, which announced their merger plans in August, previously said they would resort to a pre-packaged bankruptcy in order to complete their deal if they were unable to win support of 100 percent of their lenders. The companies have been seeking to restructure their debt by pushing out the maturity dates two years to 2016.

The companies' joint announcement, issued Monday, said that -- subject to court approval of their plans -- they expect the merger will be completed within 45 to 60 days.

"A substantial majority of our lenders and stockholders have pledged their support for this transaction and we remain committed to closing it in the first half of this year," Peter McDonald, president and CEO of SuperMedia, said in a statement.

In a pre-packaged bankruptcy the legally required percentage of creditors have agreed to the reorganization plan in advance. Lenders typically fare better in a pre-packaged bankruptcy.

The companies will continue operating while in bankruptcy and say they won't need to obtain financing to see them through the process. They are seeking court approval to continue paying their bills and salaries in full without interruption.

Both companies are familiar with bankruptcy court. Each filed for bankruptcy in the wake of the recession and emerged with new names and less, but still substantial, debt. Dex One was R.H. Donnelley before its first bankruptcy.

Since emerging from bankruptcy the two companies have continued to struggle along with the rest of their industry. The combination of the economic downturn plus the widespread shift of advertising dollars from print to digital media have disrupted their business.

Although both companies have been expanding their digital advertising revenue, it hasn't been growing rapidly enough to compensate for their declining print revenue.

Dex One reported assets of $2.84 billion and liabilities of $2.79 million while SuperMedia reported assets of $1.4 billion and liabilities of $1.9 billion in their bankruptcy filings in federal bankruptcy court in Delaware, according to Bloomberg News.

Shareholders of both companies approved the merger deal last week.

The corporate headquarters of the combined company will be in Dallas and run by McDonald, SuperMedia's top executive. Dex CEO Alfred Mockett is departing after the merger is completed.

As of February, Dex had about 230 workers in the Triangle, down from 300 when the merger was announced in August, with the vast majority of the decline due to attrition. Company-wide, Dex had about 2,250 workers, down from 2,600 in August.

Source: (c)2013 The News & Observer (Raleigh, N.C.) Distributed by MCT Information Services

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