Fitch Downgrades R.H. Donnelley Corp. and Subsidiaries to 'D' on Bankruptcy Filings

RHD (Holding Company [HoldCo])

--Issuer Default Rating (IDR) downgraded to 'D' from 'C';

--Senior unsecured notes affirmed at 'C/RR6'.

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

--IDR downgraded to 'D' from 'C';

--Bank facility affirmed at 'CC/RR3';

--Senior unsecured notes affirmed at 'C/RR6'.

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

--IDR downgraded to 'D' from 'C';

--Senior unsecured notes affirmed at 'C/RR6'.

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

--IDR downgraded to 'D' from 'C';

--Bank facility affirmed at 'B-/RR1';

--Senior unsecured downgraded to 'C/RR4' from 'CC/RR3';

--Senior subordinated affirmed at 'C/RR6'.

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

--IDR downgraded to 'D' from 'CC';

--Bank facility downgraded to 'CC/RR3' from 'CCC/RR3'.

By definition, issuers with 'D' ratings have defaulted on all of their obligations. The 'B-/RR1' rating on DXW's secured bank facility reflects prospects of 91%-100% recovery. The 'CC/RR3' rating on the RHDI and DXE secured bank facilities reflects 51%-70% recovery prospects. The 'C' rating represents the lowest possible issue rating for a defaulted security with below average or poor recovery prospects.

These rating actions affect approximately $10 billion in total debt as of March 31, 2009.

The downgrade reflects the announcement that RHD has initiated voluntary Chapter 11 proceedings to restructure its debt obligations. RHD stated that it had reached agreement in principle with key creditors. The terms of the agreement include:

--Reduction of $6.4 billion in debt, including $700 million in secured debt repaid by cash at 100% principal recovery.

--Approximately $6 billion of unsecured notes would be exchanged for 100% of the equity in the restructured company and $300 million of unsecured notes.

--In addition to increased pricing, enhanced collateral and guarantee package, the secured lenders will benefit from cash sweeps of 65% for DXE and DXW and 60% for RHDI.

The filing has been made in the U.S. Bankruptcy Court for the District of Delaware. The company will continue to operate its businesses during the restructuring and has stated it has sufficient cash to do so. The company has fully drawn from its OpCo bank credit facilities and stated that cash on hand as of the bankruptcy filing was over $300 million (March 31, 2009 cash balances were reported at $533 million). RHD generated approximately $550 million in free cash flow in 2008.

RHD expects to have $3.1 billion in secured debt and $3.4 billion in consolidated debt after emerging from bankruptcy.

For further information, see Fitch's press release dated Feb. 5, 2009 and the July 28, 2008 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 the subsidiaries listed above.

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. The issuer did not participate in the rating process other than through the medium of its public disclosure.

SOURCE: Fitch Ratings

Fitch Ratings 
Mike Simonton, CFA, 312-368-3138 (Chicago) 
Rolando Larrondo, 212-908-9189 (New York) 
Cindy Stoller, 212-908-0526 
(Media Relations, New York) 
cindy.stoller@fitchratings.com