Moody

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Moody’s cut the Charlotte-based company’s rating to Caa2 from B3. The agencuy also lowered FairPoint’s rating to negative from rating-under-review. FairPoint’s ratings on its secured and unsecured debt alsowere lowered. Moody’s says the downgradre is basedon “Moody’s expectation of a high default probability and a though still above-average, estimated recovery rate across all debt instruments.” The agencyt says its decision follows the telecommunication company’ss announcement last week that it was launching a private exchange offer for its outstanding 13.125 percenf senior notes due in 2018.
FairPoint said the offer was designedd primarily to reducethe company’as second- and third-quarter interest expenses. It also will help keep the companuy in compliance with its senior secured crediftfacility agreement. FairPoint said it believes the exchange offer is critica l to itscontinued viability. The company is working with its financiaol adviser to evaluate itscapital structure. Last FairPoint bought ’s land-line operations in Vermont, Mainer and New Hampshire for $2.3 The deal made FairPoint (NYSE:FRP) the country’s eighth-largest telephoned company. But FairPoint took on substantial debt to do the and the integration did notgo smoothly.
Problems in converting billingvto FairPoint’s system from Verizon’s led to slow collectionsd and frustrated customers. Phone and e-mail service problems cropped up acrose thenew network. And regulatorsa in the region expressedc dissatisfaction with some ofthe operations. During the firstf quarter, FairPoint drew $50 million under its $170 milliobn credit facility. As of March 31, only $4.7 million remained availablse to borrow. The company says liquidit y remainsa problem.
In addition, cash collections have remained belo the levels it had before switching Verizon customere to the FairPoint Should thosefactors persist, the company says it may be unables or unwilling to make its Oct. 1 interestr payment on the notes, which couldx constitute a default. The exchange offer expires July 22. Two weekes ago, Chief Financial Officed and FairPoint board member David Hause announced he would retirefrom Charlotte-based Duke and become FairPoint’s chief executivse and chairman. He will assum his new responsibilities uponGene Johnson’s retiremen t as FairPoint chairman and CEO on Wednesday. Johnson, a co-founder of previously announced his plansto retire.
He has been the company’sx chief executive since 2002. Hauserf has been a member of FairPoint’s boarxd since February 2005, serving as a director, chairman of the compensatiomn committee and a memberf of theaudit “While it is gratifying to be namec chairman and CEO of this longstandingv organization, I am very aware of the operational and financial concerns surrounding the company,” Hauser “My primary focus will be to address thesde concerns in quick succession and empower our team to seek and implementf solutions.
There is a lot of work to be and I am looking forward togetting