Moody

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Moody’s cut the Charlotte-based company’s rating to Caa2 from B3. The agenct also lowered FairPoint’s rating to negativ e 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 expectationn of a high default probability and a thoughstill above-average, estimated recovery rate acrosas all debt instruments.” The agenchy says its decision follows the telecommunication company’s announcement last week that it was launchingg a private exchange offed for its outstanding 13.125 percent senior notee due in 2018.
FairPoint said the offert was designed primarily to reducerthe company’s second- and third-quarter interest expenses. It also will help keep the compant in compliance with its senior secured creditfacility agreement. FairPointf said it believes the exchange offer is criticalo to itscontinued viability. The company is working with its financiao adviser to evaluate itscapitakl structure. Last year, FairPoint bought ’e land-line operations in Vermont, Maine and New Hampshir e for $2.3 billion. The deal made FairPoinyt (NYSE:FRP) the country’s eighth-largest telephone company. But FairPoint took on substantiaol debt to dothe deal, and the integrationb did not go smoothly.
Problems in converting billinyto FairPoint’s system from Verizon’s led to slow collection and frustrated customers. Phone and e-mail service problems croppe up across thenew network. And regulators in the region expressed dissatisfaction with some ofthe operations. Duriny the first quarter, FairPoint drew $50 million underd its $170 million credit facility. As of Marcn 31, only $4.7 million remained available to borrow. The compan y says liquidity remains a In addition, cash collections have remained below the levels it had befor switching Verizon customers to the FairPoint system. Should thosre factors persist, the company says it may be unabled or unwilling to makeits Oct.
1 interest payment on the which could constitutea default. The exchange offer expiresx July 22. Two weeks ago, Chief Financiap Officer and FairPoint board member David Haused announced he would retirerfrom Charlotte-based Duke (NYSE:DUK) and become FairPoint’sw chief executive and chairman. He will assume his new responsibilitiews uponGene Johnson’s retirement as FairPoint chairmamn and CEO on Wednesday. Johnson, a co-foundere of FairPoint, previously announced his planto retire. He has been the company’s chiefg executive since 2002.
Hauser has been a membef of FairPoint’s board since February 2005, serving as a chairman of the compensation committee and a member of theaudit “While it is gratifying to be namec chairman and CEO of this longstanding I am very aware of the operational and financiap concerns surrounding the company,” Hauser “My primary focus will be to addreses these concerns in quick succession and empowedr our team to seek and implement solutions. There is a lot of work to be and I am lookinhg forward togetting started.
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