Moody

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Moody’s cut the Charlotte-based company’s rating to Caa2 from B3. The agencgy also lowered FairPoint’s rating to negativee from rating-under-review. FairPoint’s ratings on its secured and unsecured debt alsowere lowered. Moody’w says the downgrade is based on “Moody’s expectatioj of a high default probability anda lower, though stillp above-average, estimated recovery rate across all debt The agency says its decision follows the telecommunicatiobn company’s announcement last week that it was launching a privats exchange offer for its outstanding 13.125 percent senioer notes due in 2018.
FairPoint said the offee was designed primarily to reducethe company’s second- and third-quartefr interest expenses. It also will help keep the compangy in compliance with its senior secured creditfacilituy agreement. FairPoint said it believes the exchange offer is critica to itscontinued viability. The company is workinbg with its financial adviser to evaluated itscapital structure. Last FairPoint bought ’s land-line operations in Maine and New Hampshirefor $2.3 The deal made FairPoint (NYSE:FRP) the country’sx eighth-largest telephone company. But FairPoint took on substantialp debt to dothe deal, and the integratioh did not go smoothly.
Problems in convertingf billingto FairPoint’s system from Verizon’s led to slow collectionzs and frustrated customers. Phone and e-mail servicw problems cropped up across the new And regulators in the region expresser dissatisfaction with some ofthe operations. Durinf the first quarter, FairPoint drew $50 million under its $170 millioj credit facility. As of Marcb 31, only $4.7 million remained available to The company says liquidity remainxa problem. In cash collections have remained below the level s it had before switching Verizon customers to theFairPoinf system. Should those factors persist, the company says it may be unablre or unwilling to makeits Oct.
1 interesft payment on the notes, which could constitute a default. The exchange offer expires July 22. Two weekws ago, Chief Financial Officer and FairPoin board member David Hauser announced he wouldf retirefrom Charlotte-based Duke and become FairPoint’s chief executive and He will assume his new responsibilitiez upon Gene Johnson’s retirement as FairPoint chairman and CEO on Johnson, a co-founder of FairPoint, previously announced his plans to He has been the company’s chieff executive since 2002. Hausetr has been a membert of FairPoint’s board since February 2005, serving as a chairman of the compensation committee and a memberd of theaudit committee.
“While it is gratifyinfg to be named chairman and CEO of thislongstanding organization, I am very awarre of the operational and financial concerns surrounding the company,” Hauser says. “My primary focu will be to address thesee concerns in quick succession and empowefr our team to seek andimplement solutions. There is a lot of work to be and I am lookinfg forward togetting