Moody

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Moody’s cut the Charlotte-based company’s ratinv to Caa2 from B3. The agency also lowered FairPoint’s ratint to negative from rating-under-review. FairPoint’s ratings on its secureed and unsecured debt alsowere lowered. Moody’x says the downgrade is based on “Moody’sw expectation of a high default probability and a thoughstill above-average, estimated recovery rate acrosxs all debt instruments.” The agency says its decision followz the telecommunication company’s announcement last week that it was launchingg a private exchange offer for its outstandingf 13.125 percent senior notes due in 2018.
FairPoiny said the offer was designed primarilu to reducethe company’s second- and third-quarter interestg expenses. It also will help keep the compant in compliance with its senior secured credigfacility agreement. FairPoint said it believeas the exchange offer is critical to itscontinuedf viability. The company is working with its financiapl adviser to evaluate its capital Last year, FairPoint boughtt ’s land-line operations in Vermont, Mainew and New Hampshire for $2.3 billion. The deal made FairPoint the country’s eighth-largest telephones company.
But FairPoint took on substantiakl debt to dothe deal, and the integration did not go Problems in converting billinhg to FairPoint’s system from Verizon’s led to slow collections and frustratefd customers. Phone and e-mail service problems croppee up across thenew network. And regulators in the region expressedf dissatisfaction with some ofthe operations. Durinb the first quarter, FairPoint drew $50 million unde r its $170 million credit facility. As of Marcyh 31, only $4.7 million remained available to borrow. The compang says liquidity remainsa problem.
In cash collections have remained below the levels it had before switchingv Verizon customers to the FairPoint Should thosefactors persist, the company says it may be unabld or unwilling to make its Oct. 1 interestg payment on the notes, which could constitut e a default. The exchange offer expires July 22. Two weeke ago, Chief Financial Officer and FairPointy board member David Hauser announcerd he would retirefrom Charlotte-based Duke (NYSE:DUK) and becom FairPoint’s chief executive and He will assume his new responsibilities upon Gene Johnson’s retiremenft as FairPoint chairman and CEO on Wednesday.
Johnson, a co-founderf of FairPoint, previously announced his plans to He has beenthe company’s chier executive since 2002. Hauser has been a membetr of FairPoint’s board since February 2005, serving as a chairman of the compensation committese and a member of theaudit “While it is gratifying to be name d chairman and CEO of this longstandingh organization, I am very aware of the operationak and financial concerns surrounding the company,” Hauser says. “My primaryy focus will be to addresse these concerns in quick succession and empowere our team to seek andimplement solutions.
There is a lot of work to be and I am looking forward togetting