FairPoint Ordered To Pay Rebates to Customers in Maine

Bankrupt FairPoint Communications Inc. will pay rebates to customers in Maine who received sub-par service from the rural voice and data service provider.

A federal judge on Tuesday said FairPoint can start making the payments, although the exact amounts were not disclosed. Last December, Main’s Public Utilities Commission (PUC) ordered FairPoint to repay $1.72 per line each month through December of this year. FairPoint balked at the requirement and the matter went to court-ordered mediation. The negotiations led to Tuesday’s announced settlement, which still must be approved by Maine’s PUC – that process could take up to 120 days, according to a lawyer quoted by Bloomberg. Meantime, it’s hard to say how many end users will benefit from the deal if commissioners give it their blessing.

Chances are, the Maine PUC will favor the order. Regulators in the Pine Tree State have come down hard on FairPoint for the billing errors and service snafus that resulted from the bungled takeover of Verizon Communications Inc. (VZ) landlines in 2007.

The rebate news came one day after FairPoint filed its long-awaited reorganization plan and met with reporters to discuss it.

The document outlines the following: the events leading up to Chapter 11 filing; the reasons why FairPoint filed for Chapter 11 – which CEO David Hauser blamed mostly on too much debt; an outline for viability as a commercial enterprise; a description of key events; financial projections; a proposed capital structure upon emergence from Chapter 11; treatment of each class of creditor claims under the plan; and a description of risks associated with the strategy.

“When FairPoint emerges, it will do so with a capital structure that contains significantly less debt,” Hauser said on Monday. “In fact nearly $1.8 billion or roughly two-thirds of our existing debt will be extinguished. As a result, FairPoint’s financial position and overall liquidity will be significantly strengthened.”

FairPoint’s reorganization plan was unveiled after weeks of delay. Hauser attributed the holdups to talks with key stakeholders – the parties have now reached mutually agreeable terms, he said.

FairPoint went bankrupt in October 2009. When it sought Chapter 11 protection, it reported assets of $3.24 billion and liabilities – including the debt assumed as part of the Verizon properties takeover – of $3.23 billion.

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