On May 28, 2009, R.H. Donnelley and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in order to restructure the company’s balance sheet.  The company sees the filing as a critical step in its long-range strategic plan to solidify its position as the leading provider of local commercial search solutions in the markets it serves. CEO Dave Swanson stated that no one could have foreseen the series of events that lead to the venerable Yellow Pages publisher to file Chapter 11 bankruptcy protection in a debt-restructuring which will reduce the company’s 10 billion debt by US$ 6.4 billion reducing the annual interest payments by US$ 500 million.  All existing shareholders will be wiped out.

The Chapter 11 filing punctuates a dramatic fall for R.H. Donnelley, which had a $5 billion market capitalization in May 2007.  The company was brought down by two major forces: the flight of traditional Yellow Pages advertisers to the Internet and a staggering debt load of $9 billion. The company accumulated most of that debt through a series of acquisitions when its business was riding high.  The recession has only added to the company’s woes, as evidenced by a first-quarter loss of $401.2 million. R.H. Donnelley said advertising sales slumped 17 percent, to $598 million, during the last quarter.

The lesson learned from this debacle is the fact that the Yellow Pages publisher’s huge debt and debt service stifled its ability to adjust to market realities.  R.H. Donnelley’s contact databases appear no longer as valuable as they used to be.  It is hard for Yellow Pages publishers to compete on the web with services provided by competitors such as Google, with mapping services etc, which are readily available through powerful hand held devices.  With advertising revenues evaporating it was only a matter of time for this publisher to file Chapter 11.

R.H. Donnelley was the oldest and largest Yellow Pages publisher. It was founded in Chicago in 1886.  The company merged with Dun & Bradstreet in 1961 and was spun-off from Dun & Bradstreet in 1996 into an independent publicly traded company.   Source: Press Release / Press Reports

BIIA Newsletter June 2009 Issue