Bharper

Idearc: Cheapest Stock in the Phone Book

$1.9 bil of their $9 bil in debt is floating...$4.4 bil of their tranche B loan is swapped to fixed at 7.57%, you have to read a footnote to find that, but the major majority is fixed. The decline in libor will shave about $57 mil in annual interest expense between 3Q07 and now. That's about a 25 cent/share annual benefit to EPS.

Idearc: Cheapest Stock in the Phone Book

I was surprised they completely eliminated the dividend, but I think Harless's insistence on paying it...and her constant marketing of it to investors...was one of the reasons she got axed. If the co could instead engage in some very modest stock buybacks, they could preserve EPS over the long-term. That of course must be approved within their bank covenants. With the debt reductions alone EPS will likely otherwise fall over time, assuming 4-5% annual revenue attrition in the traditional business.

Idearc: Cheapest Stock in the Phone Book

I don't understand the thinking behind buying at a 1.7x P/E and having a target price that represents a 2.5x P/E. If your DCF comes up with that value, it implies that given the leverage, the valuation is very sensitive to the assumptions. Given that the market cap is about $600 mil relative to $9 bil in debt, it leaves little margin for error.