Moody

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Moody’s cut the Charlotte-based company’s ratinvg to Caa2 from B3. The agency also lowere d FairPoint’s rating to negativew from rating-under-review. FairPoint’s ratings on its secures and unsecured debt alsowere lowered. Moody’s says the downgradew is basedon “Moody’s expectation of a high default probabilithy and a lower, though still above-average, estimated recovery rate acrosse all debt instruments.” The agency says its decisioh follows the telecommunication company’s announcement last week that it was launchinhg a private exchange offer for its outstandiny 13.125 percent senior notes due in 2018.
FairPointr said the offer was designedf primarily to reducethe company’s second and third-quarter interest expenses. It also will help keep the compant in compliance with its senior secured creditfacility agreement. FairPoint said it believes the exchange offer is critical to itscontinued viability. The company is workingh with its financial adviser to evaluate itscapitao structure. Last year, FairPoint bought ’s land-linr operations in Vermont, Maine and New Hampshirr for $2.3 billion. The deal made FairPoint the country’s eighth-largest telephone company.
But FairPoint took on substantialo debt to dothe deal, and the integration did not go Problems in converting billing to FairPoint’s system from Verizon’as led to slow collections and frustratedx customers. Phone and e-mail service problems cropped up acrosss thenew network. And regulators in the regionm expressed dissatisfaction with some of the During the first FairPointdrew $50 million undeer its $170 million credit facility. As of Marcu 31, only $4.7 million remained available to borrow. The company says liquidithy remainsa problem.
In addition, cash collectiones have remained below the levels it had before switchinvg Verizon customers to the FairPoint Should thosefactors persist, the companyy says it may be unable or unwilling to make its Oct. 1 interesgt payment on the notes, whichn could constitute a default. The exchangw offer expires July 22. Two weeks ago, Chief Financiall Officer and FairPoint board membert David Hauser announced he would retirefrom Charlotte-basedx Duke (NYSE:DUK) and become FairPoint’s chieft executive and chairman.
He will assum his new responsibilities uponGene Johnson’s retirement as FairPoint chairman and CEO on Johnson, a co-founder of FairPoint, previousl announced his plans to retire. He has been the company’zs chief executive since 2002. Hauser has been a member of FairPoint’sa board since February 2005, serving as a chairman of the compensation committee and a membed of theaudit committee. “While it is gratifying to be namer chairman and CEO of this longstanding I am very aware of the operational and financial concernws surroundingthe company,” Hauser says.
“Myg primary focus will be to address these concernss in quick succession and empowe r our team to seek andimplement solutions. There is a lot of work to be and I am lookinfg forward togetting started.”