Fitch: R.H. Donnelley Revises Guidance; Deleveraging Remains a Challenge

Fitch currently rates RHD and subsidiaries as follows:

RHD (Holding Company)

--IDR 'B+';

--Senior unsecured notes 'B-/RR6';

R.H. Donnelley, Inc. (RHDI; Operating Company; Subsidiary of RHD)

--IDR 'B+';

--Bank facility 'BB+/RR1';

--Senior unsecured notes 'BB-/RR3'.

Dex Media, Inc. (DXI; Holding Company; Subsidiary of RHD)

--IDR 'B+';

--Senior unsecured notes 'B-/RR6'.

Dex Media East (DXE; Operating Company; Subsidiary of DXI)

--IDR 'B+';

--Bank facility 'BB+/RR1'.

Dex Media West (DXW; Operating Company; Subsidiary of DXI)

--IDR 'B+';

--Bank facility 'BB+/RR1';

--Senior unsecured 'BB+/RR1';

--Senior subordinated 'B/RR5'.

The Rating Outlook is Negative.

RHD now expects ad sales to decline between 7-8% in 2008 compared to prior expectations of down in the mid-single digits. RHD's adjusted earnings before interest taxes and depreciation (EBITDA) guidance was unchanged while its free cashflow guidance (operating cash flow less capital expenditures) was revised to between $475 and $525 from between $525 and $575 due to higher interest costs. Net debt is still expected to be around $9.5 billion.

Under these revised figures, RHD's expectations regarding leverage (on a net debt to adjusted EBITDA basis) is unchanged relative to prior guidance. However, while RHD believes its is able to take out costs to offset much of the ad sales declines, Fitch remains concerned regarding the scalability of the cost structure longer-term and is cautious regarding the company's ability to deleverage under the scenario where EBITDA declines are sustained in the mid-single digits.

Fitch will continue to monitor operating performance closely for more evidence regarding the cyclical and secular components of revenue deterioration. Fitch estimates RHD can endure low-to-mid single digit revenue declines and still de-lever the balance sheet, albeit slower than previously anticipated. Going forward, Fitch expects management will be exclusively focused on paying down debt under the secured facilities, however, we continue to expect consolidated leverage levels to remain above management's stated target of 6.0 times (x) over the intermediate term.

For further information, see Fitch's July 28 report, 'R.H. Donnelley Corp - Cost of Flexibility and Challenges of Deleveraging', available on the Fitch Ratings web site at www.fitchratings.com. The report also includes coverage of subsidiaries R.H. Donnelley, Inc. (RHDI), Dex Media, Inc. (DXI), Dex Media East (DXE) and Dex Media West (DXW).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

SOURCE: Fitch Ratings

Fitch Ratings Mike Simonton, CFA, 312-368-3138, Chicago Rolando Larrondo, 212-908-9189, New York or Media Relations: Brian Bertsch, 212-908-0549, New York