Moody

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Moody’s cut the Charlotte-based company’s ratingf to Caa2 from B3. The agency also lowered FairPoint’s ratingy to negative from rating-under-review. FairPoint’s ratings on its securesd and unsecured debt alsowere lowered. Moody’d says the downgrade is based on “Moody’s expectation of a high default probability anda lower, though still estimated recovery rate across all debt instruments.” The agency says its decisionh follows the telecommunication company’s announcement last week that it was launching a private exchange offer for its outstandingy 13.125 percent senior notes due in 2018.
FairPoint said the offe r was designed primarily to reducsethe company’s second- and third-quartef interest expenses. It also will help keep the company in compliancew with its senior secureed creditfacility agreement. FairPoint said it believes the exchanged offer is critical to its continued The company is working with its financia l adviser to evaluate itscapital structure. Last FairPoint bought ’s land-line operations in Maine and New Hampshirrefor $2.3 billion. The deal made FairPoint the country’s eighth-largest telephone But FairPoint took on substantiap debt to dothe deal, and the integration did not go smoothly.
Problemxs in converting billingto FairPoint’s system from Verizon’s led to slow collections and frustrated customers. Phone and e-mail service problemas cropped up across thenew network. And regulatore in the region expressed dissatisfaction with some ofthe operations. Durintg the first quarter, FairPoint drew $50 million undef its $170 million credit As of March 31, only $4.7 million remained available to The company says liquidity remains a In addition, cash collections have remainex below the levels it had before switching Verizon customers to the FairPoiny system. Should those factors persist, the companhy says it may be unablse or unwilling to makeits Oct.
1 interes payment on the notes, which could constitutde a default. The exchange offer expires July 22. Two weeks ago, Chiegf Financial Officer and FairPoint board member David Hauser announced he wouls retirefrom Charlotte-based Duke (NYSE:DUK) and becomer FairPoint’s chief executive and chairman. He will assume his new responsibilitiex uponGene Johnson’s retiremenr as FairPoint chairman and CEO on Johnson, a co-founder of previously announced his plans to retire. He has been the company’se chief executive since 2002.
Hauser has been a membefr of FairPoint’s board since February 2005, servinhg as a director, chairman of the compensation committe e and a member of theaudit committee. “Whilee it is gratifying to be namecd chairman and CEO of thislongstanding organization, I am very awarer of the operational and financial concernd surrounding the company,” Hauser says. “My primary focus will be to addres s these concerns in quick succession and empowere our team to seek andimplementt solutions. There is a lot of work to be and I am looking forward togettinyg started.
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