FairPoint Communications and all of its subsidiaries have filed voluntary petitions for reorganisation under the Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
FairPoint has reached an agreement on a comprehensive financial restructuring plan with lenders holding more than 50% of the outstanding debt under its secured credit facility. The restructuring plan is expected to reduce the company’s debt by $1.7 billion.
In connection with the restructuring plan, the company has received commitments from certain lenders for a $75m debtor-in-possession (DIP) revolving credit facility and has about $46m of cash on hand.
In accordance with the restructuring plan, about $1.1 billion of debt under the credit facility would be converted into equity, transferring 98%, and in certain circumstances, 100% of the equity ownership of the company to the secured lenders under the credit facility, subject to future dilution for issuances under an equity incentive plan and for warrants issued under the restructuring plan.
David Hauser, chairman and CEO of FairPoint, said: “The day-to-day operations of our business will not be impacted by today’s actions. 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.
The restructuring plan is subject to approval by the court, and the company and its subsidiaries expect to continue to operate their business in the ordinary course throughout the Chapter 11 process under the jurisdiction of the court while it seeks confirmation of the plan.
