America’s media slump has snared another major corporate, with the huge RH Donnelly printing group going into Chapter 11 on Friday night because it couldn’t pay its debts. The company, based in Cary, North Carolina, had assets of $US11.9 billion and debt of $US12.4 billion according to its statement, making it the second biggest collapse in the media and printing sector after the failure of the Chicago-based Tribune Co. Donnelly publishes 600 directories, including a number editions of The Yellow Pages in the USA.

R.H. Donnelly blamed the filing partly on “a significant decline in advertising sales due to the recent economic downturn and increased competition in the local business advertising industry.” The company had a net loss of $US401 million in the first quarter as revenue fell 11% to $US. First quarter advertising sales were $US598 million, down 17% from the first quarter 2008.

That was after losing $US2.3 billion in all of 2008 due to impairment charges as it wrote the balance sheet value of its US and international assets, and from lower earnings flowing from the impact of the recession and huge debts. The company warned on May 14 that lenders and bondholders had agreed to delay calling their loans until May 28 and wouldn’t take any action on the company’s missed debt payment.

Donnelly filed for bankruptcy protection the day after the latest deadline passed. It is aiming to emerge from bankruptcy early next year. The company said it will reorganize by cutting debt by $US6.4 billion, including about $US700 million of secured debt. Under the plan, about $US6 billion of unsecured bond debt would be exchanged for all of the equity in the reorganized company and $US300 million in unsecured notes. That means the current shareholders will be wiped out.

Peter Fray

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