FairPoint Seeks Exchange To Avoid Default
Company considers exchange closing 'critical to its continued viability.'
June 25, 2009
FairPoint Communications wants bondholders to exchange notes and give them a break on covenants, it said Wednesday. If the company doesn’t get the support it needs, it may default on some of its bonds in October.
The Charlotte, N.C.-based communications service provider made a private exchange offer for all of its outstanding $551 million in 13.125% senior notes due 2018. It will exchange the notes for notes that will be almost identical, except that the company will have the option of paying the interest with cash, by capitalizing the interest and adding it to the principal or by a combination of both.
The exchange offer has an early deadline of July 8, and the company will pay bondholders $2.50 per $1,000 tendered by the early deadline. The final deadline for the exchange is July 22. The company is also asking for permission to eliminate or amend all of the restrictive covenants.
FairPoint considers the closing of the exchange offer “critical to its continued viability,” it said in a statement. Its declining revenue and other issues make it likely that it will not be able to make its Oct. 1 interest payment, which could trigger a default. It needs 95% of bondholders’ support in order for the exchange to close.
A company spokeswoman was not immediately available for comment.
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