FairPoint could face bankruptcy by year's end
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By DANIEL BARLOW VERMONT PRESS BUREAU - Published: June 27, 2009
MONTPELIER – FairPoint Communications could file for bankruptcy by the end of 2009 if the companies it owes money to don't agree to delay interest payments on those debts, according to documents filed with the federal government this week.
The North Carolina company, which purchased Verizon's landlines and Internet services in Vermont, New Hampshire and Maine for $2.3 billion last year, told the U.S. Securities and Exchange Commission that it is strapped for cash.
FairPoint asked bond-holders with more than $500 million in notes invested in the company to consider delaying interest payments on those funds to give FairPoint more breathing room to get back on its feet.
The nine-page memo, filed with the SEC on June 24, states that if FairPoint is unable to delay payment on some of its debts, then the company "may need to seek alternative restructuring plans … or a bankruptcy proceeding, which, in each case, could negatively impact or completely eliminate the company's ability to meet its cash interest payment obligations to holders of notes."
FairPoint's financial problems have been no secret. Since taking over Verizon's systems, the company has experienced a slew of problems – including poor service to customers, confusing billing and lost e-mail addresses.
According to the SEC filing, problems arising from the change-over from Verizon's computer system to FairPoint's new system in the three states has compounded the company's financial problems.
"In addition, collection efforts have continued to be hampered by a lack of systems functionality, and, as a result, accounts receivable are increasing, which is adversely impacting the company's liquidity," the filing reads.
Beth Fastiggi, a spokesperson for FairPoint's Vermont operations, directed questions about the SEC filing Friday to a press release the company issued earlier that week. The release details the plan to delay some of its debt payments, which is "critical to its continued viability …"
In an e-mail to reporters earlier in the week, Fastiggi stressed positive news for the company, including that FairPoint has hired more than 1,000 people in the three states and increased availability of broadband Internet in Vermont from 65 to 76 percent.
"We're making steady progress toward returning to normal operations," Fastiggi wrote. "Bills are being processed and sent to customers on schedule and with significantly less errors. The volume of calls into our consumer call centers has returned to normal levels, allowing us to answer customer calls in a timely manner."
But the latest SEC filing has the Vermont Department of Public Service worried.
Spokesperson Steve Wark said the department knows about FairPoint's financial problems – and their interest in possibly restructuring – but could not speculate on what happens if the company goes bankrupt.
"Frankly, this latest filing offers more questions than answers," Wark said.
Wark said the department will use its resources to ensure that FairPoint provides what it said it will to Vermonters. But he said the telecommunications field is becoming increasingly crowded with options and FairPoint is "no longer the best option out there" for consumers.
"Our focus is on ensuring that Vermont's dominant carrier remains strong," Wark said. "But it could turn out that FairPoint is not the company to do this."
daniel.barlow@timesargus.com
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