Monday, May 18, 2009

Next Round of CDS's Due for R. H. Donnelley

Failure to pay interest on R.H. Donnelley's debt within a 30 day grace period triggered payment of credit default swaps. Reuters reported:

Net volumes of around $333.6 million are outstanding on R.H. Donnelley's debt, according to the Depository Trust & Clearing Corp.
The Carlyle Group once held R.H. Donnelley, but exited their investment in 2002. As of December 31, 2008 Donnelley had $9.6 billion in outstanding debt according to SEC filings. The company wrote down goodwill by $3.1 billion. How much of that Carlyle "valued added" disappeared with the swipe of a pen? Goodwill sits at zero. Intangible assets were written down by another $750 billion.

Management issued their going concern warning given credit downgrades, huge amounts of maturing debt and difficult business conditions. KPMG added to the bleak picture with its statement, "In our opinion, R.H. Donnelley has not maintained effective internal control over financial reporting as of December 31, 2008." That's got to hurt.