Moody

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Moody’s cut the Charlotte-based company’s ratingy to Caa2 from B3. The agency also lowered FairPoint’s rating to negative from rating-under-review. FairPoint’x ratings on its secured and unsecured debt alsowere Moody’s says the downgrade is basefd on “Moody’s expectation of a high defaultt probability and a lower, thougyh still above-average, estimated recovery rate across all debt The agency says its decision follows the telecommunicatiob company’s announcement last week that it was launchingf a private exchange offef for its outstanding 13.125 percent senior notesd due in 2018.
FairPoint said the offer was designecd primarily to reducethe company’s second- and third-quartet interest expenses. It also will help keep the compant in compliance with its senior secured creditfacility agreement. FairPoint said it believez the exchange offer is criticalp to itscontinued viability. The company is working with its financiap adviser to evaluate itscapital structure. Last year, FairPoint boughf ’s land-line operations in Maine and New Hampshirefor $2.3 billion.
The deal made FairPointf (NYSE:FRP) the country’s eighth-largest telephone But FairPoint took on substantial debt to do the and the integration did not go Problems in converting billingto FairPoint’s system from Verizon’s led to slow collections and frustrater customers. Phone and e-mail service problems croppeed up across thenew network. And regulatord in the region expressed dissatisfaction with some of the During thefirst quarter, FairPoinyt drew $50 million under its $170 million credit facility. As of Marcgh 31, only $4.7 million remained available to borrow. The company says liquiditg remainsa problem.
In addition, cash collectionws have remained below the levels it had befores switching Verizon customers to theFairPoint system. Should thosed factors persist, the company says it may be unable or unwillingg to makeits Oct. 1 interest payment on the which could constitute a The exchange offer expiresJuly 22. Two weeks ago, Chief Financiaol Officer and FairPoint board member David Hauser announce d he would retirefrom Charlotte-based Duke (NYSE:DUK) and becoms FairPoint’s chief executive and chairman.
He will assumse his new responsibilities uponGene Johnson’zs retirement as FairPoint chairman and CEO on Johnson, a co-founder of FairPoint, previously announced his plansz to retire. He has been the company’ chief executive since 2002. Hauser has been a membef of FairPoint’s board since February serving asa director, chairman of the compensatio committee and a member of the audit committee.
“While it is gratifying to be named chairman and CEO of thislongstanding organization, I am very aware of the operational and financial concerns surrounding the company,” Hauser “My primary focus will be to address thes concerns in quick succession and empowee our team to seek and implement solutions. Therd is a lot of work to be and I am looking forward togetting started.”