We kind of saw this coming, but it’s official now. Fairpoint filed for Chapter 11 bankruptcy today. “The day-to-day operations of our business will not be impacted by today’s actions,” said David Hauser, Chairman and CEO of FairPoint in a company statement. “We want to assure our customers, employees and vendors that we remain committed to continuing to provide reliable, uninterrupted service to all of our customers. Today’s actions represent a critical and positive step in our efforts to reduce our indebtedness, strengthen our financial condition and position FairPoint to compete more effectively in a dynamic marketplace,” concluded Hauser.
By filing for chapter 11, FairPoint says it will restructure $1.7 billion of debt. “We are extremely pleased with the terms of the agreement reached with our secured lenders,” stated Alfred Giammarino, Executive Vice President and CFO of FairPoint. “This plan will provide FairPoint with significantly greater financial flexibility through the reduction of nearly $170 million in minimum annual debt service requirements. This enhanced flexibility will enable us to continue to invest in new technologies and provide advanced services to customers throughout our service territories,” concluded Giammarino.
This is not the greatest of news for Verizon and Frontier. They are currently engaged in a deal to sell millions of Verizon access lines to Frontier. It’s a deal somewhat similar to what FairPoint did last year. While Frontier is in a much better position, both financially and operationally, than FairPoint, many will try to color the Verizon-Frontier deal in much the same way, creating some significant controversy and uncertainty for the current deal to be approved. Look for Verizon to find ways to prop up the Frontier deal, offering some guarantees/assurances that the FairPoint fiasco will not repeat itself with Frontier.