Dex Media Debt to Go to Par After Bankruptcy, Hayman’s Bass Says
Dex Media Inc. (DXM)’s bonds will more than double in value to trade at par and its shares will jump to as much as 10 times current levels, according to Kyle Bass, whose Dallas-based hedge-fund firm Hayman Advisors LP made $500 million in 2007 betting against U.S. subprime mortgages.
Dex Media is a small company and a “cheap option,” Bass said today at the Ira Sohn conference in New York. Hayman owns 9.9 percent of the equity, he said.
Shares of the Dallas-Fort Worth Airport, Texas-based company surged 17.9 percent to $16.17 as of 1:41 p.m. in New York after his comments, pushing its market capitalization to $275.6 million. The company’s $219.7 million of 14 percent subordinated bonds due in January 2017 last traded March 12 at 44 cents on the dollar to yield 41.8 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Dex Media is the combined entity of phone-book publishers Dex One Corp. and SuperMedia Inc., set to merge through implementation of their companion bankruptcy reorganizations approved April 29. Lenders will be paid in full with new debt, unsecured creditors will be fully paid so long as they continue providing credit and shareholders of the two companies will share ownership of the merged business.
Hayman held 5.9 percent of the equity at the end of last year, the second-largest share of firms that report their holdings, according to data compiled Bloomberg. Franklin Resources Inc. (BEN) held 31.6 percent as of April 12.
Dex Media will have as much as $175 million in projected annual cost savings and will be able to use $1 billion in net operating losses to offset future income taxes.
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