Dex, SuperMedia File for Bankruptcy to Complete Merger

Dex One Corp. and SuperMedia Inc., two money-losing phone book publishers, plan to merge by returning to bankruptcy, about three years after each exited court protection.

The merger will save Dex One, formerly known as R.H. Donnelley Corp., and SuperMedia, formerly Idearc Inc., to save as much as $175 million annually, Dex One General Counsel Mark W. Hianik said in an affidavit filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

“The merger will enable the combined company to benefit from improved operating scale, significant synergies and enhanced cash flow,” Hianik said in the filing.

The companies filed separate Chapter 11 petitions in which Dex One said it had $2.84 billion in assets and $2.79 billion in debt, while SuperMedia said it had $1.4 billion in assets and $1.9 billion in debt. SuperMedia lists billionaire John Paulson’s Paulson & Co. as a shareholder.

Before the filings, the publicly traded companies had won support for the merger from shareholders and almost all of their lenders.

Supermedia had net income of $314 million in the 12 months ended Sept. 30, after losing $967 million the previous two years, according to information compiled by Bloomberg. Dex One had income of $62 million in 2012 after losing $518 million in


Operating Losses

The companies will be able to use $1 billion in net operating losses from Dex One to save about $400 million on future income taxes, SuperMedia Chief Financial Officer Samuel D. Jones said in court papers.

The companies publish yellow pages and online directories and provide advertising services online and through direct mail.

SuperMedia, based in Dallas, exited its previous bankruptcy in December 2009, and Cary, North Carolina-based Dex One exited the following month.

The combined company would have 5,800 employees. They expect to exit bankruptcy within 60 days, they said in a statement.

Among Dex One’s largest unsecured creditors listed in court papers were holders of $219.7 million in senior subordinated notes with Bank of New York Mellon as trustee; and Google Inc., owed $11 million in trade debt.

Unsecured creditors cited by SuperMedia included Google, owed $3.74 million in trade debt; and Product Development Corp., owed $2.79 million.

2006 Spinoff

SuperMedia was formerly known as Idearc, a unit of Verizon Communications Inc., before it was spun off in 2006.

SuperMedia’s business has been “impacted by a highly competitive industry in the U.S.,” including newspapers, radio, television, the Internet, billboards, direct mail, telemarketing and other yellow pages directory publishers, said Jones, the CFO for SuperMedia, in explaining the bankruptcy and merger plans in court papers.

The cases are In re Dex One Corp, 13-10533, U.S. Bankruptcy Court, District of Delaware. and In re SuperMedia Inc, 13-10545, U.S. Bankruptcy Court, District of Delaware.

(Updates with previous bankruptcies in first paragraph.)
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