FairPoint Files For Bankruptcy

AP File Photo/Robert F. Bukaty

FairPoint Communications says customers will not be affected by its plans to restructure debt.

VPR's John Dillon reports:

(Dillon) The bankruptcy filing came just 18 months after the small North Carolina company took over Verizon's landline business in Maine, New Hampshire and Vermont.

FairPoint borrowed about $2.3 billion to pay for the deal. That debt - coupled with falling revenues from a decline in land line sales - left the company struggling financially.

CEO David Hauser says FairPoint has reached a deal with lenders to cut its debt by about $1.7 billion. He said FairPoint's customers will not be affected by the bankruptcy.

(Hauser) "We are not going out of business. This is largely a financial measure to make our business stronger. We will continue to conduct business while navigating through the Chapter 11 process."

(Dillon) Chapter 11 refers to a section of the bankruptcy code that allows companies to restructure debt under the oversight of the court. Hauser said FairPoint has already reached a deal with key bank lenders that hold half of its debt. The lenders have agreed to take an ownership stake in the company.

(Hauser) "Our current interest expense that we pay every year is $200 million. Under this new plan, it will be about $65 million. Plus during this Chapter 11 process we will not pay any interest on the bank debt or the bonds. So we will be in a much stronger financial position coming out of this."

(Dillon) As part of its deal to buy Verizon's territory, FairPoint made commitments to Vermont to expand broadband Internet service.

Hauser said the company has not yet decided if it would try to change that deal in bankruptcy court. He said the company has 45 days to file a reorganization plan with the court.

(Hauser) "Within those 45 days we will be having dialogues and be making decisions about are there any conditions that we want changed.... But I think the fundamental is: we're very committed to broadband roll-out."

(Dillon) The Vermont Department of Public Service - the state agency that represents consumers - has hired bankruptcy counsel to represent the state's interest.

The state is already in litigation with FairPoint over chronic service quality problems that occurred after the Verizon switchover. The Public Service Department last summer challenged the company's license to operate here.

Steve Wark is deputy public service commissioner. He said the litigation will continue.

(Wark) "Just because this company is allowed to restructure in bankruptcy proceeding does not mean that it's going to improve their service quality. So we really need to make sure that they stay on track and that we hold them to their obligations."

(Dillon) FairPoint has also not ruled out layoffs or changes to its union contracts as it tries to cut its costs.

For VPR News, I'm John Dillon in Montpelier.