SuperMedia Inc. (SPMD)

[roger wilco]

SPMD PR S&P cuts Supermedia rtg to 'CC' from 'B-'4:18PM ET on

Thursday Dec 09, 2010 by Thomson Reuters
(The following statement was released by the rating agency.)

https://research.tdwaterhouse.ca/research/public/Markets/NewsArticle/1314-WNA6546-1

-- U.S. yellow page directory publisher SuperMedia Inc. is seeking to amend its credit agreement to permit the company flexibility to repurchase term debt at prices below the face value of this debt.

-- We are lowering our rating on SuperMedia to 'CC' from 'B-' and placing it on CreditWatch with negative implications.

-- The negative CreditWatch implications reflect that we expect to lower the ratings upon completion of the amendment and commencement of a subpar repurchase of term debt.

Dec 9 - Standard & Poor's Ratings Services today lowered its corporate credit rating on Dallas, Texas-based SuperMedia Inc <SPMD.O>. to 'CC' from 'B-'. We also lowered our issue-level rating on the company's senior secured credit facility to 'CC' from 'B-'. At the same time, we placed these ratings on CreditWatch with negative implications. The recovery rating on the senior secured debt remains unchanged at '3', indication our expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default. SuperMedia, the second largest directory publisher in the U.S., had total debt outstanding of $2.5 billion as of Sept. 30, 2010. "The downgrade reflects our view that the company's discussion about a proposed amendment, which would allow for subpar repurchases of its term debt of up to $185 million for 90 days from the effective date of the amendment, suggests a high probability of a subpar buyback," explained Standard & Poor's credit analyst Andy Liu. "Under Standard & Poor's criteria, we would view these subpar buybacks as tantamount to a default. The term loan is trading at a significant discount to the par value, and buybacks could be done by means of a tender offer." We have taken this view in light of the company's debt leverage and poor operating outlook as indications of financial distress. We see significant risks of secular declines in the print directory sector, as well as increased competition as small business advertising expands across a greater number of marketing channels. The loan agreement specifies a total leverage covenant (which is set at 6.5x through the end of 2010, stepping up to 7.5x thereafter) and an interest coverage covenant (which is set at 1.4x through the end of 2010, stepping down to 1.1x thereafter). Although we expect credit measures to weaken materially from current levels, we do not anticipate that the company is at risk of potentially violating a financial covenant over the near term. Cash balances as of Sept. 30, 2010 increased to $331 million, from $300 million at June 30, 2010. Upon completion of the amendment and commencement of a subpar repurchase of term debt, we expect to lower the corporate credit rating to 'SD' (selective default) and the issue-level rating on the company's senior secured credit facilities to 'D'. As soon as possible thereafter, we will reassess the company's business outlook and financial profile and assign new ratings. RELATED CRITERIA AND RESEARCH

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Complete ratings information is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Primary Credit Analyst: Andy Liu, CFA, Chicago (1) 312-233-7052;

[e-mail] Secondary Contact: Chris Valentine, New York;

[e-mail] (New York Ratings team) (email: [e-mail]; Reuters messaging: edith.honan.thomsonreuters.net; Tel: [phone]))