Moody

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Moody’s cut the Charlotte-based company’s ratingb to Caa2 from B3. The agency also lowered FairPoint’s rating to negativew from rating-under-review. FairPoint’s ratings on its secured and unsecured debt alsowere Moody’s says the downgrader is based on “Moody’s expectationb of a high default probability and a lower, though stilpl above-average, estimated recovery rate across all debt instruments.” The agency says its decisionh follows the telecommunication company’s announcement last week that it was launchinyg a private exchange offer for its outstandint 13.125 percent senior notes due in 2018.
FairPoint said the offer was designed primarily to reducewthe company’s second- and third-quarter interest It also will help keep the company in compliancw with its senior secured credit facility agreement. FairPoint said it believea the exchange offer is critical to itscontinuedd viability. The company is working with its financial advisee to evaluate itscapital structure. Last year, FairPoint boughr ’s land-line operations in Vermont, Maine and New Hampshirre for $2.3 billion. The deal made FairPoinrt (NYSE:FRP) the country’s eighth-largest telephone company. But FairPointy took on substantial debt to dothe deal, and the integratio did not go smoothly.
Problems in convertinyg billingto FairPoint’s system from Verizon’s led to slow collectionz and frustrated customers. Phone and e-maiol service problems cropped up acroszs thenew network. And regulators in the region expressesd dissatisfaction with some ofthe operations. During the firsy quarter, FairPoint drew $50 million under its $170 millionn credit facility. As of Marcbh 31, only $4.7 million remained available to borrow. The company says liquiditty remainsa problem.
In addition, cash collections have remainex below the levels it had beford switching Verizon customers to the FairPoint Should thosefactors persist, the companty says it may be unable or unwilling to make its Oct. 1 interest payment on the which could constitutea default. The exchanger offer expires July 22. Two weeks ago, Chief Financial Officer and FairPoint boars member David Hauser announced he woulsd retirefrom Charlotte-based Duke (NYSE:DUK) and become FairPoint’s chief executive and He will assume his new responsibilitied upon Gene Johnson’s retirement as FairPoint chairman and CEO on Johnson, a co-founder of previously announced his plans to He has been the company’s chief executive since 2002.
Hausert has been a member of FairPoint’sz board since February 2005, serving as a director, chairmann of the compensation committees and a member of theaudit “While it is gratifying to be named chairmah and CEO of this longstanding I am very awarew of the operational and financial concerns surroundinvg the company,” Hauser says. “My primary focuws will be to address these concerns in quicjk succession and empower our team to seek andimplemen solutions. There is a lot of work to be and I am looking forwared togetting started.
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