Introduction

R.H. Donnelly Corporation (“Donnelly” or the “Debtor”), the Cary, North Carolina publisher of phone directories, filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on May 28, 2009.  According to its Declaration in Support of First Day Motions (the “Declaration”), the Debtor operates “Dex Net,” a business database containing information on over 600,000 businesses in 28 states.  Besides its on line services, the Debtor publishes directories in over 600 different markets reaching over 75 million users.

Debtors’ Financials

By the end of 2008, Donnelly’s assets were valued at $11.9 billion.  Its revenues for 2008 reached $2.62 billion.  As stated in its Declaration, Donnelly derived 15% of its revenue in 2008 from the sale of advertising to national and regional companies that purchase ad space in multiple directories.  As a result of the weakening economy, many of these larger ad purchasers cut back on their advertising, creating a negative effect on Donnelly’s revenue.

Going into bankruptcy, Donnelly’s prepetition secured debt totals $3.6 billion.  Combined with its unsecured debt, Donnelly has total debt outstanding of $9.9 billion.  Like with other Chapter 11 debtors,  Donnelly’s large debt played a significant role in its need to file for bankruptcy.  Donnelly’s debt is the product of various aquisitions.  By 2009, the company faced interest payments of $400 million, and by 2010, principal payments were due totaling $1.39 billion.

The Debtor’s Restructuring Plan

Weeks prior to filing for bankruptcy, Donnelly entered into a restructuring agreement with a large majority of its unsecured bondholders and secured lenders.  According to the Debtors, the tentative restructuring plan “should provide a strong platform for the consensual plan of reorganization to be filed by the Debtors … and should signficantly facilitate these proceedings …”  Under the restructuring agreement, Donelly hopes to shed approximately $6.4 billion in debt – no small undertaking.

Donnelly’s unsecured creditors will want to know what the percentage payout will be under a proposed plan of reorganization.  Statements made by Donnelly’s CFO suggest that unsecured creditors will receive a high payout on claims in this bankruptcy.  According to Donnelly’s Petition for Bankruptcy, it ten largest unsecured trade creditors are as follows:

  1. Google … $2.4 million
  2. RR Donnelly Receivables … $2.1 million
  3. Amdocs Inc. … $1.7 million
  4. Yahoo … $1.6 million
  5. Specialty Directory Distrib. Services … $882,625
  6. Harmelin Media … $745,891
  7. Product Development Corp. … $723,843
  8. Quebecor Wordl … $355,412
  9. Qwest … $274,511
  10. Wiese Research Assoc. … $272,500

This bankruptcy proceeding is before the Honorable Kevin Gross.