**Editor’s Note: Originally published in October 2009, this story ranks No. 14 on B/OSS’ all time list, based on results from our weekly newsletters combined with online traffic.**
The Charlotte, N.C.-based LEC announced on Monday it filed Chapter 11 papers after missing a key debt payment that was due by Oct. 1. The company’s stock then plunged to 37 cents before stopping trading at 10:20 a.m. Eastern.
The insolvency news was expected. Industry observers for several months have predicted FairPoint was bound for bankruptcy – the provider took on far too much debt when it bought Verizon Communications Inc. landlines in New England last year. It spent $2.3 billion on those wireline assets and, while it grew into the largest LEC in New England overnight, it saddled itself with a crushing debt load. That decision, combined with the subsequent, disastrous integration, brought FairPoint to its knees.
In fact, utilities regulators in Maine, New Hampshire and Vermont have been so unhappy with FairPoint since that purchase – customers have suffered e-mail and phone outages and major billing errors – that they’ve considered revoking the company’s license. And last week, those states’ governors said they wanted FairPoint’s word that a bankruptcy filing would not further corrode its customer service.
FairPoint officials, aware of the public backlash they’re facing, tried to alleviate concerns about Monday’s developments. David Hauser, FairPoint’s chairman and CEO, said in a prepared statement that daily operations won’t be impacted.
“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,” he said.
Alfred Giammarino, executive vice president and CFO, agreed. FairPoint is working with lenders to slash its debt from $2.7 billion to $1 billion, a plan that “will enable us to continue to invest in new technologies and provide advanced services to customers throughout our service territories,” Giammarino said.
Hausner told The Associated Press the restructuring deal will reduce costs “because interest expenses will drop a lot.”
On another front, it’s unclear what the Chapter 11 proceedings will mean for FairPoint jobs. FairPoint has enacted a series of layoffs already and has been trying to convince its union members to take pay cuts.
FairPoint’s plan still must be approved by the U.S. Bankruptcy Court in the Southern District of New York.
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