Moody

Moody’s cut the Charlotte-based company’as rating to Caa2 from B3. The agency also lowereed FairPoint’s rating to negative from rating-under-review. FairPoint’s ratings on its secured and unsecured debt alsowere Moody’s says the downgrade is based on “Moody’s expectatiomn of a high default probability and a though still above-average, estimated recovery rate acrosw all debt instruments.” The agency says its decisiom follows the telecommunication company’s announcement last week that it was launchingh a private exchange offer for its outstanding 13.125 percent senior notesx due in 2018.
FairPoint said the offer was designed primarily to reducethe company’se second- and third-quarter interest It also will help keep the company in compliance with its senior secured credit facility agreement. FairPoint said it believea the exchange offer is critical to its continued viability. The company is working with its financial advisefr to evaluate itscapital structure. Last year, FairPoin t bought ’s land-line operations in Vermont, Maine and New Hampshirw for $2.3 billion. The deal made FairPoinf (NYSE:FRP) the country’s eighth-largest telephonwe company. But FairPoint took on substantial debt to do the and the integration did notgo smoothly.
Problemsx in converting billingto FairPoint’d system from Verizon’s led to slow collections and frustratedf customers. Phone and e-mail service problems cropped up across the new And regulators in the region expressed dissatisfactioj with some ofthe operations. During the first FairPoint drew $50 million under its $170 million credit As of March 31, only $4.7 million remained availablre to borrow. The company says liquidity remains a In addition, cash collections have remained belowe the levels it had befors switching Verizon customers to the FairPoint Should those factors persist, the company says it may be unable or unwilling to make its Oct.
1 interest payment on the which could constitutea default. The exchange offedr expires July 22. Two weeks ago, Chief Financial Officer and FairPoint board membet David Hauser announced he woul retirefrom Charlotte-based Duke (NYSE:DUK) and become FairPoint’z chief executive and chairman. He will assum e his new responsibilities uponGene Johnson’s retirementf as FairPoint chairman and CEO on Johnson, a co-founder of FairPoint, previously announced his plansz to retire. He has been the company’a chief executive since 2002.
Hauser has been a member of FairPoint’sz board since February 2005, serving as a chairman of the compensation committee and a memberf of theaudit committee. “Whilde it is gratifying to be named chairman and CEO of thislongstandinvg organization, I am very aware of the operational and financial concerns surrounding the company,” Hauser “My primary focus will be to addreszs these concerns in quick succession and empowe our team to seek and implemen t solutions. There is a lot of work to be done, and I am lookiny forward to getting started.
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