Dex One and SuperMedia File For Pre-Packaged Chapter 11 Bankruptcy

Andrew Klips |

Looking for a way to complete their all-share merger, directory companies Dex One Corporation (DEXO) and SuperMedia Inc. (SPMD) jointly said Monday that they are both voluntarily filing for Chapter 11 in the United States Bankruptcy Court for the District of Delaware as part of a “pre-packaged” Plans of Reorganization.

The once dominant paper versions of the Yellow Pages has lost supremacy as advertising dollars have steadily flowed from print versions towards a digital format, creating a quick, storied history for both companies. Dex One was formerly known as R.H. Donnelley Corp., a company that filed for chapter 11 bankruptcy protection in 2009 and emerged in 2010 as Dex One Corp.

Last August, in what was called a “merger of equals,” Dex One, and SuperMedia agreed to a transaction to amalgamate the companies, with Dex One shareholders getting about 60 percent of the new company and SuperMedia shareholders receiving 40 percent.

The companies said on Monday that they have also received all necessary shareholder approval for the merger.

The merger had stipulations that the merger required 100 percent approval of all senior credit lenders to amend credit agreements, extending maturity dates of senior secured by up to 26 months.

Nearly all of the votes (398 out of 400) were in favor of amending the repayment plans, but the original agreement called for 100 percent, not 99.5 percent. This minor resistance is forcing the companies take a different strategic route to bypass the “not in favor votes” by seeking approval of the court system for their definitive plans on debt to allow the merger to be completed.

The “pre-packaged” plan has the details with creditors decided before the court filing, rather than after, as generally happens.

“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. The new company will be the trusted marketing consultant to help local businesses across the United States grow,” said Peter McDonald, president and CEO of SuperMedia, in a corporate statement today.

Neither company foresees much change during the proceedings and they still expect to close the merger in the first half of 2013.

They have filed motions with the courts to ensure continuation of normal operations, paying employee wages, salaries, benefits, vendors, suppliers, service providers, etc. without interruption. Dex One and SuperMedia also are planning on working with their appropriate exchanges to maintain their current listings, according to the statement Monday.

The companies have also said that they do not need to obtain debtor-in-possession financing during the reorganization as they substantial cash balances and continue to generate positive cash flow.

Cumulatively, “These plans intend to preserve the interests of all investors without any impairment to existing Dex One or SuperMedia equity holders and Dex One note holders,” said the companies.

Shares of DEXO closed on Friday at $2.11 and are up about 50 percent in the past 52 weeks. Shares of SPMD closed Friday at $4.41 and have climbed about 62 percent in the past year.

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