Fitch Rates R.H. Donnelley Corp's Senior Notes 'B-/RR6'; Affirms IDR at 'B+'

Business Wire, Oct 3, 2007

CHICAGO -- Fitch Ratings has assigned a 'B-/RR6' rating to R.H. Donnelley Corp's (RHD) $500 million issuance of senior unsecured notes. Fitch expects to rate Dex Media East's (DXE) proposed $1.2 billion senior secured credit facility 'BB /RR1'. Fitch has also withdrawn the 'B /RR4' rating on the R.H. Donnelley, Inc. (RHDI) notes that have been tendered as part of a previously announced transaction. Fitch has affirmed all other debt and Issuer Default Ratings (IDRs). (See the full list of ratings at the end of this release.) The Rating Outlook remains Stable.

The company announced that it intends to refinance its senior secured credit facility at DXE with a $750 million term loan A, a $350 million term loan B, and a $100 million revolver. The company also expects to tender for DXE's senior unsecured and senior subordinated unsecured notes. Fitch expects a portion (approximately $300 million) of the proceeds from this $500 million issuance to be used to repay debt at DXE. The remainder (approximately $200 million before fees and premiums) would be dedicated to RHDI's secured credit facility.

The paydown of debt at RHDI slightly improves the recovery prospects for debt at the RHD holding company level (Fitch continues to rate RHD's senior unsecured 'B-/RR6'; two notches from the IDR). The recovery prospects at Dex Media Inc. (DXI) holding company also should improve if the transaction is completed as proposed. DXI debt could be upgraded to 'B-/RR6' as it begins to receive more recovery proceeds in the waterfall. Dex Media West (DXW) is unaffected by this issuance, as it is unlikely to benefit from lower debt levels at RHDI or DXE. Fitch recognizes that the company may pursue similar repayment actions on DXW debt as the subordinate notes become callable in August 2008 (the senior unsecured notes became callable in August 2007) and Fitch will address any further capital structure actions at that time.

Going forward, Fitch expects management will likely balance debt repayment with returns of capital to shareholders (including a potential dividend) and that leverage levels will remain above 5.5 times (x) for the next three to five years. There is capacity for selective repurchases and/or financially prudent dividends incorporated into the IDR and recovery ratings. Also, the recently revised revenue, EBITDA and free cash flow guidance is accommodated within RHD's 'B ' IDR.

Fitch has taken the following rating actions:

R.H. Donnelley Corp. (RHD Holding Company)

--Issuer Default Rating (IDR) affirmed at 'B ';

--Senior unsecured affirmed at 'B-/RR6'.

R.H. Donnelley Inc. (Operating Company; subsidiary of RHD)

--Issuer Default Rating (IDR) affirmed at 'B ';

--Bank facility affirmed at 'BB /RR1';

--Senior unsecured affirmed at 'B /RR4';

--Senior subordinated, rated 'B /RR4', withdrawn.

Dex Media, Inc. (Dex Holding Company; subsidiary of RHD)

--Issuer Default Rating (IDR) affirmed at 'B ';

--Senior unsecured affirmed at 'CCC /RR6.'

Dex Media East, Inc. (Operating Company; subsidiary of Dex)

--Issuer Default Rating (IDR) affirmed at 'B ';

--Bank facility affirmed at 'BB /RR1';

--Senior unsecured affirmed at 'BB/RR1';

--Senior subordinated affirmed at 'B-/RR6'.

Dex Media West, Inc. (Operating Company; subsidiary of Dex)

--Issuer Default Rating (IDR) affirmed at 'B ';

--Bank facility affirmed at 'BB /RR1';

--Senior unsecured affirmed at 'B/RR5';

--Senior subordinated affirmed at 'B-/RR6'.

For further information, see Fitch's report dated March 8 which provides a detailed comparison and analysis of the key credit facilities and indentures and is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery.> Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.