Directory firms Dex One, SuperMedia file for bankruptcy
(Reuters) - Dex One Corp DEXO.N and SuperMedia Inc SPMD.O have both filed for bankruptcy protection after the directories publishers failed to win the full support of senior secured lenders for a change to a credit agreement needed to complete their planned merger.
Dex One, formerly known as R.H. Donnelley Corp, and SuperMedia agreed last year to combine their businesses, with Dex One shareholders expected to own about 60 percent and SuperMedia shareholders the rest of the combined company.
Unusual for bankruptcies, stockholders of both companies will not be legally impacted by the Chapter 11 filings, and the shares of both companies rose sharply on Monday.
The bankruptcy filings are the second ones in four years for each of the companies.
As part of the proposed deal, Dex One and SuperMedia agreed with a committee of senior lenders to amend their credit agreements to extend the maturity dates of the companies' senior secured debt up to 26 months until December 31, 2016.
The credit amendment needed to be approved by 100 percent of senior lenders for the companies to go ahead with the merger.
"While Dex One engaged extensively with its key stakeholders, the company was unable to obtain unanimous consent despite the broad and overwhelming lender support for the amendments and the merger," Dex One said in the filing.
Of the 400 senior secured lender votes received, 398 were cast in favor of the amendment plan, according to the filing.
Through a so-called prepackaged Chapter 11 process, the companies hope to sideline the holdout creditors and win bankruptcy court approval for the credit amendment.
In a prepackaged bankruptcy, management negotiates with major creditors the general terms of a bankruptcy plan prior to the chapter 11 filing.
Subject to court approval of the plans, the companies expect the merger to be completed in 45 to 60 days, SuperMedia said.
"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," SuperMedia CEO Peter McDonald said in a statement.
In a traditional bankruptcy, a company cancels its stock as part of the restructuring and creditors often end up owning newly issued equity in exchange for the debt they hold. But the shares of Dex One and SuperMedia will continue to trade in both cases.
Restructuring will extend the maturities of the secured debt of the companies. In return, the holders of that debt will receive higher interest rates and up to $175 million in synergies from merging the two companies, which will make it easier to service the debt.
Shares of SuperMedia rose 47 cents, or 11 percent, to $4.88 on Nasdaq. Shares of Dex One also rose 24 cents, or about 11 percent, to $2.35 on the New York Stock Exchange.
Dex One has assets and liabilities both about $2.8 billion, while SuperMedia has total assets of $1.4 billion and total debt of $1.9 billion, according to the filing.
In 2010, R.H. Donnelley Corp emerged from Chapter 11 as Dex One Corp, after filing for bankruptcy protection in 2009 owing to declining demand for print directories.
SuperMedia emerged from bankruptcy at the end of 2009, 9 months after filing for bankruptcy as Idearc Inc. The company was spun off from Verizon Communications Inc in 2006.
The two firms hope their merger will allow them to better compete in the market with reduced costs, as well as enhanced cash flow and liquidity.
The case is Dex One Corp, Case No. 13-10533, and SuperMedia Inc, Case No. 13-10545, U.S. Bankruptcy Court, District of Delaware.
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