NEW YORK--(BUSINESS WIRE)--Dex Media's third bankruptcy filing is mainly the result of continuing declines in printed yellow page advertising revenue and reduced utilization of the product as consumers continue to transition toward online searches, according to Fitch Ratings. Credit facilities maturing in late 2016, lower-than-expected synergies from its 2013 merger and high debt leverage were also contributing factors. Approximately $2.37 billion of debt will be affected by the filing, including $2.1 billion of credit facility borrowings and $270 million of 14% subordinated notes.
Dex plans to file a third bankruptcy under a proposed pre-packaged plan of reorganization. On Monday, the company announced a restructuring support agreement with creditors holding 66% of its senior secured credit facilities and over 65% of its senior subordinated notes that includes a pre-packaged bankruptcy filing. Dex anticipates filing after completion of creditor solicitation and approval on the plan.
Dex's latest bankruptcy will drive Fitch's trailing 12-month institutional term loan leveraged loan default rate to 2% from 1.8%.
The ongoing secular decline of yellow pages publishing directories has been driving down the company's enterprise value in each successive bankruptcy reorganization plan. The disclosure statement for the proposed reorganization (dated May 2) indicates a total enterprise value estimate of $1.55 billion; this compares with a $3.1 billion estimated enterprise value for the April 2013 bankruptcy reorganization plan and $4.2 billion for the January 2010 emergence.
Secured loan claims for various subsidiary credit facilities would recover between 73% and 82%, with a midpoint recovery of 78% based on the $1.55 billion enterprise value. Recovery would be in the form of a new term loan and new equity. The plan calls for an exchange of $2.1 billion of loan claims for a new $600 million new first lien term loan and 100% of the new common equity, subject to potential dilution from a management incentive plan, and a cash distribution.
The company's subordinated note claims would receive a $5 million cash payment and warrants to purchase up to 10% of the post-reorganized equity. These distributions would result in a poor recovery rate in the range of 4%-6%.
The company's most recent emergence from Chapter 11 was in April 2013, when predecessor company Dex One Corp. and merger partner SuperMedia emerged from separate bankruptcies and combined to form Dex Media, Inc. The initial bankruptcy was in 2009, when RH Donnelly filed bankruptcy and changed its name to Dex One at emergence in January 2010.
For information on the bankruptcy valuations and creditor recoveries in the prior bankruptcies please see Fitch Research on "Telecom, Media and Technology Bankruptcy Enterprise Values and Creditor Recoveries," dated August 2014, which is available on our website at www.fitchratings.com.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Related Research
Telecom, Media and Technology Bankruptcy Enterprise Values and Creditor Recoveries (Fitch Case Studies - Edition V of a Recurring Series)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750184
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