While not much of a surprise to anyone watching the telecom industry, FairPoint Communications made it official today that it has filed for Chapter 11 reorganization under in the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
Under the restructuring plan it has reached with "supporting lenders" that hold more than 50 percent of the ILEC's outstanding debt, FairPoint said it will reduce its debt by $1.7 billion. Still, FairPoint is far from being out of the woods. For one, the Restructuring Plan, which FairPoint says it will file right away, requires Court approval. In the meantime, it will be business as usual for FairPoint and its subsidiaries throughout the Chapter 11 process as it waits for the Court to confirm its Restructuring Plan.
David Hauser, Chairman and CEO of FairPoint, said the restructuring process won't have any effect on serving customers in its New England region.
"The day-to-day operations of our business will not be impacted by today's actions," said David Hauser, Chairman and CEO of FairPoint. "We want to assure our customers, employees and vendors that we remain committed to continuing to provide reliable, uninterrupted service to all of our customers. Today's actions represent a critical and positive step in our efforts to reduce our indebtedness, strengthen our financial condition and position FairPoint to compete more effectively in a dynamic marketplace," concluded Hauser.
But FairPoint will have their work cut out for themselves. Not surprisingly, the governors of Maine, New Hampshire and Vermont want a promise that any debt restructuring won't put more strains on its already poor customer service that it has provided in these regions.
Working with unions
In related news, FairPoint has been negotiating a new contract with union workers in its Vermont, New Hampshire and Maine regions. Late last week, FairPoint leaders held a closed door meeting with union members in Boston as it looks at what options it has to avoid bankruptcy.
Other than saying it is looking at ways to cut costs, FairPoint Vermont spokesperson Beth Fastiggi said that negotiating a new union contract with workers in New England is one option it is considering, she did not say what stage the negotiations were at or when an agreement would be reached. "FairPoint's financial situation has been no secret," Fastiggi said Thursday in a statement. "One of the avenues that we are looking at is reducing our costs."
The two unions that working for FairPoint-the IBEW and the CWA--were both opposed to FairPoint acquiring Verizon's New England network assets. Arguing that the purchase was not financially sound, FairPoint has struggled to maintain the lines ever since they switched them over to their own back office systems in February.
Union opposition to acquisitions is not just unique to FairPoint. Frontier is facing similar opposition as the CWA has launched a campaign to block the ILEC's acquisition of Verizon's rural lines.
- See the official restructuring release here
- Times Argus has this article
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