Maine Owl

Told you so


Jack McKay and Steve Husson of Food AND Medicine warn against FairPoint in September 2007

A cloud of doom hangs over the northern New England land-line telephone carrier. Today in the news a changing of the guard is reported "amid money problems." According to a story in the Montpelier Times Argus, Vermont has "hired a law firm with experience in corporate bankruptcy cases" to prepare to deal with the shaky company.

Meanwhile, in a June 24 filing with the SEC, FairPoint itself seems to counter its own happy talk about improving service with a dose of heavy reality,

Form 8-K for FAIRPOINT COMMUNICATIONS INC, 24-Jun-2009
Regulation FD Disclosure, Other Events, Financial Statements and Exh
Item 7.01 Regulation FD Disclosure

The Company has a highly leveraged capital structure and has essentially fully drawn all borrowings available under the Credit Facility. In the future, the Company expects that its primary sources of liquidity will be cash flow from operations and cash on hand. Because of Cutover issues that have prevented the Company from executing fully on its operating plan for 2009, the Company's revenue has continued to decline. In addition, cash collections have remained below pre-Cutover levels, causing further stress on the Company's liquidity position. Should these factors persist, the Company may be unable or unwilling to make the October 1, 2009 interest payment on the Notes. If the Company is unable or unwilling to make the October 1, 2009 interest payment on the Notes, such failure would constitute an event of default under the Indenture as well as under the Credit Facility, in each case following the expiration of the 30-day cure period contained in the Indenture with respect to such payment. In such case the holders of the Notes and the lenders under the Credit Facility would be permitted to accelerate the obligations under the Notes and the Credit Facility, resulting in most or all of the Company's long-term debt becoming due and payable. In that event, the Company would be unable to fund these obligations.

None of this has stopped FairPoint from blitzing the media with cheerful ads, many about the great broadband service remote small businesses can get. Executives have been available as well, in THIS June 25 MPBN phone-in, for example.

I do not doubt the sincerity of FairPoint's desire to be a good phone/internet provider. We use them. I don't have many complaints about the dsl service we receive. The bills have been very messed up for months, but that has yet to require much effort on our part to straighten out. They do seem to be working on it without us bugging them.

But, as many critics warned in 2007, the financial terms under which the company was ushered in look to be exactly the losing proposition we all feared.

Update: Jeff Inglis at The Phoenix just now has out a new piece on FairPoint, "FairPoint watch: Making a quiet killing — of itself and Maine's economy." Portland businesses can't get simple service orders fulfilled without a wait of "more than a month to transfer phone connections to their new locations." Oy.

Jeff also spoke with public advocate Dick Davies, leading to this interesting hint about what the future may hold if FairPoint does fail.

While Davies says bankruptcy is "clearly ... more than a remote possibility," he is hoping that FairPoint will be able to "stop those losses and get people to come back," so as to avoid another transition to a new owner, or the involvement of a federal bankruptcy court in the state's telecommunications industry.

Previous posts on FairPoint:

• FairPoint struggling with debt payment
• Vermont takes right step in blocking phone deal