(Host) The region’s dominant phone company will see its debt cut by almost two-thirds under a reorganization plan filed with bankruptcy court.
FairPoint Communications also reached a settlement with state regulators that resolves a legal challenge to the company’s license to operate in Vermont.
VPR’s John Dillon has more:
(Dillon) FairPoint took on $2.7 billion in debt to buy Verizon’s northern New England land line business.
That debt proved unsustainable for the regional phone company, and the company filed for bankruptcy reorganization last fall.
The plan submitted to bankruptcy court this week cuts the debt substantially. Banks and other lending institutions would get about 88 cents on the dollar, while unsecured creditors such as contractors or suppliers will get about 17 cents for each dollar they’re owed.
In a conference call, FairPoint CEO David Hauser outlined the plan, which still needs to be approved by the court.
(Hauser) "Roughly two-thirds of our existing debt will be extinguished. As a result, FairPoint’s financial position and ongoing liquidity will be significantly strengthened."
(Dillon) A heavy debt load wasn’t FairPoint’s only problem as it took over Verizon’s territory last year. Soon after the switchover, the company’s call-centers were flooded with complaints as customers reported numerous service quality and billing problems.
These issues – and FairPoint’s failure to resolve them quickly – led the Vermont Department of Public Service to take steps to revoke the company’s license to operate here.
But that case would be settled, as well, as part of the reorganization plan filed in bankruptcy court. FairPoint CEO Hauser said Vermont has agreed to withdraw its legal action.
(Hauser) "The settlement agreement provides that the Department of Public Service will request that the petition filed last year requesting modification or revocation of the certificate of public good be withdrawn. Similar to New Hampshire, in Vermont the parties agree to defer service quality index penalties related to prior years pending our performance against those measures this year."
(Dillon) The settlement also requires the company to continue with its commitment to roll out broadband Internet service to Vermont customers. But the agreement gives the company six more months to meet those goals.
FairPoint Vermont President Mike Smith says the settlement allows FairPoint to focus on its future.
(Smith) "Obviously, 2009 was not the best of years for FairPoint. So what we’re looking now, is going and looking forward in 2010, and try to figure out the path here that meets the needs of the state, meets the needs of the company, meets the needs of the people of the state of Vermont."
(Dillon) Steve Wark is deputy commissioner of the Public Service Department, the state agency that represents consumers. He says the bankruptcy plan removes debt and provides a level of certainty to FairPoint.
(Wark) "For us, it gives us the certainty knowing that this company will move forward, they’ll restructure. Largely, the conditions that applied during the sale will continue to apply. But we have an opportunity once the company files its business plan to within 60 days to comment, and, frankly reject it, if we don’t think it meets the best interests of the state of Vermont."
(Dillon) Wark said the state is seeing fewer new complaints about FairPoint service. But he said the number of unresolved complaints remains a concern.
For VPR News, I’m John Dillon in Montpelier.