This morning, Dex One announced third quarter earnings and provided the following update on the proposed merger:
Following the announcement of the proposed merger between Dex One and SuperMedia, a joint steering committee of the senior secured lenders for both companies was formed to evaluate the proposed amendments to the parties’ respective credit agreements as set forth in the Merger Agreement. The consent of the lenders to the proposed amendments is a condition to closing the merger.
Dex One and SuperMedia continue to negotiate with the steering committee in an attempt to reach agreement on amendments to the parties’ respective credit agreements. The parties are also considering alternatives to the current transaction structure to obtain the necessary lender consents.
Additional information about the proposed merger is included in a Form 8-K filed with the Securities and Exchange Commission today by Dex One.
The Form 8-K provides:
“…The Merger Agreement may be terminated by either party if the conditions to closing are not satisfied and the closing has not occurred before November 30, 2012, which date may, under certain circumstances, be extended until December 31, 2012...
…Thus far, the senior secured lenders, acting through the steering committee, have rejected the proposed amendments to the parties’ respective credit agreements. Dex One and SuperMedia continue to negotiate with the steering committee in an attempt to reach agreement on amendments to the parties’ respective credit agreements that will secure the consents necessary to effect the Merger. In light of the current negotiations, however, Dex One recognizes that the parties may not be able to obtain sufficient approval from the senior secured lenders to any proposed amendments to the parties’ respective credit agreements. Therefore, possible alternatives to the current transaction structure to effect the Merger are under consideration, including a “prepackaged” restructuring of the parties’ senior secured indebtedness through proceedings instituted under Chapter 11 of the Bankruptcy Code to implement possible amendments that may garner sufficient, though not unanimous, support from the parties’ respective lenders, while otherwise maintaining the basic economic terms of the Merger Agreement…”
It continues to be our goal to implement the terms of the merger agreement as previously announced. The merger agreement requires that we obtain approval of 100 percent of both companies’ lenders to the proposed credit agreement amendments. A “prepackaged” or “pre-pack” Chapter 11 bankruptcy is one alternative under consideration to effect the merger and not impair any other creditors (including employees) in the event we cannot obtain 100 percent support for the proposed credit agreement amendments. Under this alternative, each company would seek support for the proposed amendments, merger and reorganization (the “plan”) from all lenders, who would then have the opportunity to vote on the plan in advance of either company filing a Chapter 11 case. To qualify as a pre-pack, at least a majority of lenders holding 2/3 of the debt in each credit agreement who cast
votes would need to vote in favor of the plan. Immediately upon filing a pre-pack case, the company would seek court approval of the plan over the objections, if any, of lenders not supporting the plan or other interested parties. The pre-pack process would enable the companies to seek approval of the plan on an expedited basis relative to a “traditional” Chapter 11. At this time, the company has made no decisions with respect to potential alternative strategies, including a pre-pack strategy. It would be our intention, if a pre-pack were pursued, to treat all stockholders as contemplated by the merger agreement and otherwise to leave all company constituencies (including employees, retirees, vendors, customers and other creditors) unaffected.
Dex One and SuperMedia are working together to reach an agreement that works for lenders while at the same time provides the company with the flexibility to efficiently operate and profitably grow the business post-close. We believe this to be in the best interest of all stakeholders.
