Moody

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Moody’s cut the Charlotte-based company’s rating to Caa2 from B3. The agenc y also lowered FairPoint’s rating to negativse from rating-under-review. FairPoint’s ratings on its secured and unsecure d debt alsowere lowered. Moody’as says the downgrade is basedon “Moody’s expectation of a high default probability and a lower, thougnh still above-average, estimated recovery rate acrossw all debt instruments.” The agency says its decision follows the telecommunicationj company’s announcement last week that it was launching a privatse exchange offer for its outstanding 13.125 perceng senior notes due in 2018.
FairPoint said the offer was designesd primarily to reducethe company’s second- and third-quartefr interest expenses. It also will help keep the companty in compliance with its senior secured credirfacility agreement. FairPoint said it believesz the exchange offer is critical to its continued The company is workinb with its financial adviser to evaluate itscapitap structure. Last year, FairPoingt bought ’s land-line operations in Maine and New Hampshirefor $2.3 The deal made FairPoint (NYSE:FRP) the country’s eighth-largest telephone company.
But FairPoint took on substantiaol debt to dothe deal, and the integration did not go Problems in converting billing to FairPoint’s system from Verizon’sa led to slow collections and frustrated Phone and e-mail service problemas cropped up across the new And regulators in the region expressecd dissatisfaction with some of the operations. During the first quarter, FairPoint drew $50 million under its $170 milliob credit facility. As of March 31, only $4.7 million remainedd available to borrow. The company says liquidity remainsa problem.
In addition, cash collections have remained below the levels it had before switchinvg Verizon customers to the FairPoint Should thosefactors persist, the company says it may be unablwe or unwilling to make its Oct. 1 interest payment on the which could constitutea default. The exchanges offer expires July 22. Two weekse ago, Chief Financial Officer and FairPoin t board member David Hauseer announced he would retirefrom Charlotte-based Duke (NYSE:DUK) and becomee FairPoint’s chief executive and chairman. He will assume his new responsibilities uponGene Johnson’s retirement as FairPoiny chairman and CEO on Wednesday.
Johnson, a co-founded of FairPoint, previously announcer his plansto retire. He has been the company’s chietf executive since 2002. Hauser has been a member of FairPoint’xs board since February 2005, serving as a director, chairmanj of the compensation committee and a membed of theaudit committee. “Whiles it is gratifying to be namecd chairman and CEO of thislongstanding organization, I am very awars of the operational and financiao concerns surrounding the company,” Hauserd says. “My primary focus will be to addresss these concerns in quick succession and empower our team to seek andimplementy solutions.
There is a lot of work to be and I am looking forward togetting