On August 1, 2016, Dex Media, Inc. (“Dex”), one of America’s largest providers of marketing solutions for local businesses, announced that it had completed its financial restructuring and emerged from Chapter 11 bankruptcy. Moelis & Company acted as the exclusive investment banker to Dex and played a critical role in helping the company emerge from bankruptcy protection after only 77 days.
At the time, Dex’s primary historical marketing product, yellow page directories, had been experiencing significant double-digit top-line declines in the face of burgeoning internet directory and customer review-based businesses (e.g. Google, Yelp and Angie’s List) as well as the aging of the product’s core demographic. In reaction to those trends, Dex developed and marketed digital advertising solutions, but the transition to digital products was slower than originally anticipated.
As a result, Dex effectuated a merger with Supermedia Inc. through concurrent Chapter 11 bankruptcies in an effort to combat industry dynamics through consolidation. The company emerged with four cross-collateralized secured credit silos creating a complex capital structure, which impeded management’s ability to operate the business as a unified company. In addition to the first-lien secured debt of approximately $2.1 billion, the company also had unsecured notes of $270 million. At the end of 2016, Dex faced a maturity wall and leverage levels would not support a complete refinancing of commitments.
Moelis & Company negotiated a significant deleveraging of the company in order to afford the company the financial flexibility to achieve its strategic plan. The plan was a fully-consensual prepacked plan of reorganization, which provided for the first-lien lenders across the four credit silos to own 100% of the reorganized equity and $600 million of loans under the new credit facility. Dex’s unsecured noteholders also received a $5 million cash payment and warrants to purchase up to 10% of the reorganized equity in exchange for their approximately $270 million in claims.
The company’s strengthened capital structure, with approximately $1.8 billion less total debt, created significant financial and strategic flexibility. Furthermore, the transaction enabled the company to deepen its commitment to help local businesses thrive by developing and providing marketing solutions to help them grow their organizations.