David Hauser, chairman and CEO of FairPoint Communications, said today the company has reached a milestone in its debt restructuring efforts: the filing of its plan of reorganization and disclosure statement.
Hauser said he was following through on his commitment at the time his company filed for Chapter 11 protection to inform the public of key events in the process. Today’s filing sets in motion the next phase of the Chapter 11 process.
FairPoint has reached some settlements with the states of New Hampshire and Vermont as well as the IBEW and the CWA.
Hauser said the purpose of Chapter 11 process is to ensure fair treatment of the company’s various classes of creditors and to enable the parties to understand in plain English how their lives are being affected. “To create a level playing field, companies in Chapter 11 are required to prepare a disclosure statement that fully describes the plan terms, the case and company background in a way that provides creditors adequate information to be able to vote on the plan,” he said.
The plan outlines the following: the events leading up to Chapter 11 filing; the reasons that caused FairPoint to file for Chapter 11 – which Hauser said were largely driven by high level of indebtedness; 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 certain risks associated with the Chapter 11 plan.
“When FairPoint emerges, it will do so with a capital structure that contains significantly less debt,” Hauser said. “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.”
Hauser said the company has reached mutually agreeable terms for a number of its key stakeholders in advance of today’s filings, giving this as the reason for the many delays in filing the plan of reorganization.
“The additional time we have taken at this stage of the process to reach these agreements will allow us to avoid costly litigation further along in the process and will enable us to speed up the timeline for completing the remainder of the process,” Hauser said. “So hopefully these agreements will allow us to emerge from Chapter 11 sooner than otherwise would have been possible.”
Hauser said FairPoint has reached a tentative agreement with the leadership of the IBEW and the CWA, which represent all its unionized employees in New England. The agreements are subject to ratification by the unions’ membership. He expects that process to conclude over the next couple of weeks.
“We believe this agreement provides the mechanism for reaching the financial objectives set forth in the Chapter 11 filing last fall,” Hauser said. He called it fair and equitable.
