FairPoint phone company files for bankruptcy, Thanks Verizon! – Yahoo! News
We all knew it was going to happen. Verizon should be held accountable for actions related to bankruptcies of Idearc Media, FairPoint, and Hawaiian Telecom!
By CLARKE CANFIELD, Associated Press Writer Clarke Canfield, Associated Press Writer
PORTLAND, Maine – FairPoint Communications Inc. had its work cut out when it grew sixfold overnight by buying Verizon Communications’ land line and Internet operations in three New England states. But the nation’s credit crisis and a bungled technology transfer made the task virtually impossible.
With a battered financial sheet and a tattered reputation, FairPoint filed for Chapter 11 bankruptcy protection on Monday, barely 18 months after becoming the dominant telecommunications company in Maine, New Hampshire and Vermont.
The bankruptcy filing was widely anticipated and fulfilled critics’ predictions that FairPoint was taking on more than it could handle when it bought the Verizon properties for $2.3 billion.
But nobody’s taking satisfaction in saying, “I told you so.”
“What good does it do us? We can say it, but we’re left here to do deal with it,” said Pete McLaughlin of the International Brotherhood of Electrical Workers, which represents FairPoint employees.
FairPoint, based in Charlotte, N.C., owns and operates phone companies in 18 states with a total of 1.65 million lines. Its largest holdings are in Maine, New Hampshire and Vermont.
The company voluntarily filed for bankruptcy after agreeing on a deal with key lenders that would lower its debt from $2.7 billion to $1 billion and significantly cut its interest expenses, CEO David Hauser said. The plan is subject to approval by the U.S. Bankruptcy Court in the Southern District of New York.
Hauser said the filing will not affect the company’s day-to-day operations or its efforts to expand its high-speed Internet network in northern New England.
“From a customer point of view, this is a nonevent,” he said.
Monday’s filing prompted the New York Stock Exchange to suspend trading in the company’s stock. The company was notified last month that its stock could be removed from the exchange because the price had fallen below $1 a share for 30 consecutive trading days.
Regulators and politicians said they would look out for the interests of FairPoint’s customers and workers. The regulatory boards in Maine and New Hampshire said they have hired bankruptcy specialists to help during the process. Staff members from the three states’ regulatory boards planned to meet with FairPoint’s management and staff on Monday.
“The creditors seem to be taken care of, but that doesn’t mean the consumers’ interests have been protected,” said Maine Public Advocate Richard Davies, who represents consumers.
Besides negotiating with banks and bondholders to restructure its debt, FairPoint has been asking its nearly 3,000 union employees in the three-state region for concessions in a cost-cutting move.
Union leaders, meanwhile, said FairPoint’s problems were caused by “crushing debt and an organizational chaos,” not by its work force.
When FairPoint first proposed buying Verizon’s land line and Internet assets in northern New England, opponents said FairPoint was too small to take on such a large network. At the time, FairPoint had 975 employees and about 300,000 access lines nationwide; Verizon had more than 3,000 employees and 1.6 million access lines in northern New England alone.
Davies said two events are largely to blame for the company’s unraveling.
After the purchase was approved by regulators in Maine, New Hampshire and Vermont, but before the acquisition was completed on April 1, 2008, FairPoint was hobbled by the Wall Street financial crisis, he said. To finance the deal, the company planned to issue bonds paying 8.125 percent but instead had to issue bonds that paid 13.125 percent — causing its interest payments to soar.
When the company switched from Verizon’s computer systems to its own network last winter, it was plagued with customer-service, order-fulfillment and billing problems. Those problems caused costs to go up and its customer base to go down.
“Two factors that are major contributors to this weren’t known to regulators at the time the deal was approved,” he said. “Hindsight is a wonderful thing and if we’d known all these things back then I’m sure there would’ve been a different decision.”
Meredith Hatfield, New Hampshire’s consumer advocate, said the challenge now will be advocating for customers’ interests and getting FairPoint to follow through on its commitments.
“Obviously ratepayers and customers of FairPoint potentially have a lot to lose,” she said.
FairPoint said it has about $46 million of cash on hand. It said it received commitments for a $75 million debtor-in-possession revolving credit facility while in bankruptcy.