They say FairPoint, now buried in $2.7 billion worth of debt, has made questionable decisions and continues to do so as it formulates post-insolvency financial projections. The service provider is expected to still be in debt once it emerges from bankruptcy, to the tune of $1 billion.
It’s not clear what an investigation would achieve. FairPoint already has made the decisions – for example, the group says, the disastrous Verizon landline takeover and naming a non-telecom board member as CEO – that landed the service provider in bankruptcy in the first place.
Even so, FairPoint executives are negotiating with lenders and, bondholders allege, have contracted to receive 10 percent of the company’s equity once it’s reorganized. That agreement puts managers’ interests ahead of shareholders’, the bondholders say. The filers also criticize proposed incentive plans for FairPoint’s top dogs.
All in all, they told the court this week, they want to know “whether there has been an effort by the debtor’s management to cover up their own operational shortcomings.”
FairPoint, for its part, sidestepped inquiries about the accusations. Jill Wurm, a company spokeswoman, told the Burlington Free Press FairPoint disputes the claims and will deal with them “in due course through the bankruptcy court process.”
FairPoint filed for Chapter 11 bankruptcy in late October after failing to make a crucial debt payment. The move was unsurprising. Ever since FairPoint wrapped the purchase of Verizon’s wireline assets in New England, it has floundered on all fronts, from billing and customer service to network cutovers. The problems have been so severe that some lawmakers have pressed for FairPoint’s operating licenses to be revoked in their states.