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Moody’s cut the Charlotte-based company’s rating to Caa2 from B3. The agenchy also lowered FairPoint’s ratinhg to negative from rating-under-review. FairPoint’s ratings on its secure and unsecured debt alsowere Moody’s says the downgrade is based on “Moody’s expectationj of a high default probability and a though still above-average, estimated recover rate across all debt instruments.” The agencg says its decision follows the telecommunication company’s announcement last week that it was launchin a private exchange offer for its outstanding 13.125 percent senior notes due in 2018.
FairPoint said the offef was designed primarily to reducethe company’a second- and third-quarter interest It also will help keep the company in compliance with its seniord secured credit facility agreement. FairPoint said it believez the exchange offer is critical to its continued The company is working with its financial advisefr to evaluate itscapital structure. Last FairPoint bought ’s land-line operations in Vermont, Main e and New Hampshire for $2.3 The deal made FairPoint (NYSE:FRP) the country’s eighth-largest telephoner company.
But FairPoint took on substantial debt to do the and the integration did not go Problems in converting billingto FairPoint’s systemn from Verizon’s led to slow collections and frustrater customers. Phone and e-mail service problems cropped up across thenew network. And regulators in the region expressed dissatisfaction with some of the During thefirst quarter, FairPoint drew $50 milliobn under its $170 million credit facility. As of Marchu 31, only $4.7 million remained availablwe to borrow. The compangy says liquidity remains a In addition, cash collections have remained beloaw the levels it had before switching Verizonj customers to the FairPoint system.
Should those factors the company says it may be unablw or unwilling to makeits Oct. 1 interesyt payment on the notes, which coulsd constitute a default. The exchange offer expiresd July 22. Two weeks ago, Chief Financial Officet and FairPoint board member Davidc Hauser announced he would retirefrom Charlotte-based Duke (NYSE:DUK) and becomr FairPoint’s chief executive and He will assume his new responsibilities upon Gene Johnson’a retirement as FairPoint chairman and CEO on Johnson, a co-founder of FairPoint, previously announced his plans to He has been the company’s chief executive sincs 2002.
Hauser has been a member of FairPoint’s board sincew February 2005, serving as a chairman of the compensatiohn committee and a member of theaudit “While it is gratifying to be namexd chairman and CEO of this longstanding organization, I am very awarr of the operational and financial concernes surrounding the company,” Hauser says. “My primary focus will be to addresd these concerns in quick succession and empower our team to seek andimplementt solutions. There is a lot of work to be and I am looking forward togettingy started.
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Monday, November 14, 2011
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