AUGUSTA, Maine — FairPoint Communications filed for bankruptcy protection on Monday as part of the company’s efforts to dig out from massive debts accrued since purchasing Verizon’s telephone and Internet business in northern New England 18 months ago.
FairPoint officials said that the voluntary Chapter 11 filing should have no impact on customers in Maine, New Hampshire or Vermont or prevent the company from living up to its promise to expand access to high-speed Internet in the region.
“This won’t impact our operations,” said Jeff Nevins, spokesman for the company in Maine. “We are here working. The call center is taking calls. The trucks are rolling to do installations. It is normal operations.”
State officials said they planned to play an active role in the bankruptcy proceeding in order to protect the public’s interests.
“My first priority is ensuring that Maine customers and ratepayers are taken care of,” Gov. John Baldacci said in a statement. “I spoke with FairPoint CEO David Hauser this morning, and I reiterated that customers must receive the services they expect.”
Although FairPoint’s performance has improved in recent months, the decision to file for bankruptcy protection reflects the degree of the financial challenges facing the Charlotte, N.C.-based company. Also Monday, the New York Stock Exchange suspended trading of FairPoint’s stocks.
FairPoint officials said Monday’s Chapter 11 filing is part of a larger restructuring plan negotiated with creditors that will enable the company to reduce its debts from $2.7 billion to $1 billion. As a result, interest costs paid by the company are expected to drop from $200 million annually to $65 million.
At the same time, the company is seeking wage cuts and other concessions from thousands of unionized workers throughout the region. The proposed concessions have yet to be approved by the major unions, which opposed FairPoint’s takeover of Verizon’s business in northern New England.
FairPoint was plagued by problems as soon as the switchover from Verizon took place early this year. Customers faced long delays getting through to a live person at call centers — and in some cases getting through at all — as well as billing mix-ups and lengthy waits for installation or service orders.
Those problems merely exacerbated FairPoint’s financial situation as customers began dropping the company’s service or choosing other providers.
Company officials have since attributed many of the issues to network and computer glitches related to the switchover from Verizon. At the urging of state regulators and public advocates in Maine, Vermont and New Hampshire, FairPoint has since hired an independent consulting firm to study its back-office systems and recommend changes.
FairPoint has also made significant progress addressing the problems, especially at the call centers and order backlogs, although company officials acknowledge that additional improvement is needed.
As part of receiving regulatory approval for the Verizon deal, FairPoint pledged to invest $40 million in broadband Internet infrastructure in Maine over the next five years. Expanding high-speed Internet services — particularly in rural areas — is generally regarded as critical to FairPoint’s financial future as land line telephones become less prevalent.
Nevins said the company already has spent $20.4 million on broadband in Maine since April 2008 and plans to continue expanding its high-speed Internet services in the state.
“It’s an important part of our strategy going forward,” Nevins said.
William Black, deputy public advocate in the Maine Office of Public Advocate, pointed out that FairPoint had yet to file the complete Chapter 11 plan so it was impossible to say if or how restructuring could affect the company’s investment in broadband.
FairPoint said it has about $46 million of cash on hand. It said it received commitments for a $75 million debtor-in-possession revolving credit facility while in bankruptcy.
The governor’s office, the Maine Public Advocate’s Office, as well as several other telecommunication businesses affected by FairPoint’s situation, plan to file with the court as joint intervenors in the company’s bankruptcy hearing.
Meredith Hatfield, New Hampshire’s consumer advocate, said the challenge now will be advocating for customers’ interests and getting FairPoint to follow through on its commitments.
“Obviously ratepayers and customers of FairPoint potentially have a lot to lose,” she said.
The U.S. Bankruptcy Court in the Southern District of New York will consider FairPoint’s filing.
The Associated Press contributed to this report.