Verizon (NYSE: VZ) may have shed a large bulk of wireline assets that it felt weren't worth keeping by selling them off to FairPoint (Nasdaq: FRP) and Frontier (NYSE: FTR), respectively, but now a group of FairPoint's creditors claims that the larger telco's sale led FairPoint into bankruptcy.
According to the fraudulent transfer lawsuit that was filed in North Carolina, the FairPoint litigation trust argues that the smaller telco's $2.3 billion purchase of Verizon's New England lines in 2008 was the main reason the smaller telco went bankrupt 18 months after it completed the deal.
In the complaint, plaintiffs argues that FairPoint purchased "inferior assets that had no future" and that "The company had no chance given the hand it was dealt by Verizon."
Not surprisingly, Verizon dismissed the suit as "meritless."
"FairPoint Communications' 2008 acquisition of Verizon's northern New England wireline operations occurred after thorough due diligence on the part of FairPoint and its lenders and lawyers, as well as extensive review and approvals from telecommunications regulators in Maine, Vermont, and New Hampshire," Verizon said in a statement.
When the deal was originally consummated, many critics argued that FairPoint was biting off more than it could chew.
Following the completion of the acquisition in 2009, FairPoint became saddled with a number of customer service, order fulfillment and billing problems. When it could not overcome these issues, it filed for Chapter 11 bankruptcy protection in October 2009.
For more:
- newsobserver.com has this article
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