Phone Book Publisher Says “No” for Now 

Will it be bankruptcy?

The Dallas Business Journal reported today that Idearc Inc.’s largest shareholder has issued a statement saying the company has no need to contemplate the possibility of filing for Chapter 11 bankruptcy in the future.

Idearc, headquartered at Dallas/Fort Worth International Airport, publishes telephone books and provides consumer information over the Internet. It has about 7,200 employees and 100 offices in the U.S.

Shareholder says “No”

The shareholder, Jack Corwin, sent letters to each Idearc board member and issued a public statement saying he was “shocked” to find statements in Idearc’s earnings release suggesting that the company is pursuing all strategic options and that the option of filing for Chapter 11 bankruptcy protection is on the table.

In his letter to shareholders Corwin said that other alternatives need to be pursued, including the option of Idearc paying down outstanding debt with the $510 million in cash it had on hand in late 2008. He added that failure to pursue other alternatives before deciding on a Chapter 11 bankruptcy reorganization is a breach of the Board’s fiduciary duty to shareholders.

“This comes at a time when all eyes are on corporate America to behave with the utmost fiduciary responsibility. Where alternatives may exist for companies to avoid bankruptcy it is highly unusual for a corporation to choose the route of bankruptcy at the risk of damaging [its] business and harming [its] employees and other stakeholders,” Corwin said. “The impact on local and national communities and economies is significant, to put it mildly,” he added.

Earning statement says “Maybe so”

Last week, Idearc posted a fourth-quarter loss of $77 million on sales of $709 million, and said in notes attached to the earnings statement that it is “currently considering a restructuring” under federal bankruptcy laws. Based on current forecasts and year-end results, Idearc is out of compliance with one lender’s agreement and risks being out of compliance with a second. As a result, lenders have the right to consider all the company’s debt in default and could call it due within 30 days, Idearc said.

Shareholder would be last in line for payment

In bankruptcy, shareholders such as Corwin are last in line to be paid. As of mid-February Corwin reported holding more than 8% of Idearc stock, or more than 12 million shares. Idearc shares were trading at 5.5 cents at midday on Monday.