Fitch: R.H. Donnelley's 'B+' IDR Unaffected by Lowered Guidance

Business Wire, Feb 28, 2008

CHICAGO -- R.H. Donnelley Corp. announced it has lowered its guidance for 2008. The company also announced it will not initiate a dividend in order to apply all cash flow towards debt repayment. The operating softness is not a significant concern for Fitch Ratings, which had been anticipating that secular shifts and cyclical pressures could weigh on revenue growth going forward. In Fitch's view, there are very few potential catalysts to offset revenue pressure.

RHD's ratings continue to reflect the company's cash flow generating capacity. Stability is supported by a high recurring revenue (over 85%), the contractual nature of the company's revenues, and solid geographic and client diversity. Low ongoing capital expenditures, favorable tax benefits and limited drains on working capital contribute to the strong conversion of EBITDA to free cash flow. Also, the yellow pages industry has been and is expected to be less sensitive to advertising revenue cyclicality than other traditional advertising based media. Absent shifts in financial policies, Fitch believes RHD's core operations could endure a cyclical downturn in the near term even when layering in some secular shifts.

However, Fitch has been more cautious on the company's financial policies as RHD has made a digital acquisition, repurchased shares and announced a dividend within two years of completing the Dex Media acquisition. Given significant weakness in the company's stock price, Fitch believes management will continue to balance debt repayment with some returns of capital to shareholders or acquisitions over the next several years. However, Fitch views the pull-back of the dividend as positive sign in this regard. Even with the strong free cashflow dynamics Fitch does not expect leverage to reach and be maintained within management's stated target of 5.5 times (x)-6.0x in the intermediate term. Although it recently demonstrated access to capital in the third and fourth quarters of 2007, at over $10 billion, Fitch is cognizant that the company's debt burden and the state of the credit markets could heighten refinancing risk in the coming years. Fitch will continue to monitor the company's access to capital and plans as it relates to debt maturities and credit facility expirations. There has been and remains moderate capacity for some sustained top line revenue softness and modest additional shareholder friendly actions incorporated into the Issuer Default Rating (IDR). The Rating Outlook remains Stable.

Fitch currently rates RHD and its subsidiaries as follows:

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

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

--Senior unsecured 'B/RR5'.

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

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

--Bank facility 'BB /RR1';

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

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

--Senior unsecured 'B/RR5'.

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

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

--Bank facility 'BB /RR1'.

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

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

--Bank facility 'BB /RR1';

--Senior unsecured 'BB /RR1';

--Senior subordinated 'B/RR5'.

For further information, see Fitch's 15-page report on R.H. Donnelley Corp and subsidiaries R.H. Donnelley, Inc. (RHDI), Dex Media, Inc. (DXI), Dex Media East (DXE) and Dex Media West (DXW) dated Feb. 11, 2008 available on the Fitch Ratings web site at www.fitchratings.com.

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.