Dex Media East may trade lower as investors make room for R.H. Donnelley

By Sara Rosenberg

New York, Nov. 6 - Dex Media East LLC bank paper felt slightly weaker to some market participants on Wednesday in the secondary market ahead of Thursday's R.H. Donnelley launch, according to some market sources. However, one trader said that he didn't see much of a change as he traded the paper over par during the day.

Basically, since the Dex Media East loan broke in the secondary it has been at par plus levels. On Wednesday the loan was settling in around 99¾ bid, par offered, according to a second trader. "It's probably a little weaker than it was yesterday. It feels a little heavier."

One fund manager speculated that it's possible that people are clearing out some of their Dex paper in order to make room for the new Donnelley paper, which may give people a chance to pick up the Dex paper at a discount. The trader admitted that he "wouldn't be surprised" if people were selling some of the new to make room for the newer.

The Donnelley $1.55 billion credit facility consists of a $125 million six-year revolver with an interest rate of Libor plus 350 basis points, a $575 million six-year term loan A with an interest rate of Libor plus 350 basis points and an $850 million 71/2-year term loan B with an interest rate of Libor plus 400 basis points, according to market sources.

"The buy side has the negotiating power right now," the trader said. "We'll see where Donnelley clears." If for some reason Donnelley doesn't clear at Libor plus 400 on the institutional side, than investors may be able to pick up a little extra return on their investment compared to Dex, which did clear at a spread of 400 basis points.

According to a syndicate source though, the Donnelley has "been structured to clear the market."

The Dex Media East $1.49 billion credit facility consists of a $100 million revolver with an interest rate of Libor plus 300 basis points, a $690 million term loan A with an interest rate of Libor plus 300 basis points and a $700 million term loan B with an interest rate of Libor plus 400 basis points.

JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities are the lead banks on the Dex deal, which is being used to fund the leveraged buyout of the directory services business by The Carlyle Group and Welsh, Carson, Anderson & Stowe.

Bear Stearns, Deutsche and Salomon Smith Barney are the lead banks on the R.H. Donnelley deal, which will be used to help fund the acquisition of Sprint Corp.'s directory publishing business and refinance debt.

R.H. Donnelley is a Purchase, N.Y. marketer of yellow pages advertising.

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