BANGOR, Maine — Imagine buying a $200,000 home at a mortgage rate of 6 percent, then watching that rate climb to 10 or 12 percent after the first month.
If you had a chance to knock that interest back down to a more manageable level, you would probably do it, right?
That’s the predicament FairPoint Communications faced when it decided to file for Chapter 11 bankruptcy protection earlier this week to restructure its finances.
Shortly after the sale of Verizon to FairPoint went through in April 2008, FairPoint saw the interest rate on its $500 million in bonds increase from 8 percent to more than 13 percent. That coupled with inherited operating system problems created mounting debt.
Peter Nixon, president of the North Carolina company that took over Verizon’s operations in Maine, New Hampshire and Vermont, said FairPoint hopes to eliminate $1.7 billion in debt under its restructuring plan, including $135 million in interest alone.
“One of the things we want to stress is that it won’t affect customers,” Nixon said during a meeting Wednesday at the Bangor Daily News. “Our objective of making this go smoothly has been achieved.”
Nixon said he and other FairPoint executives have been working hard to assure employees and customers that the recent filing was simply a necessity to move the company forward.
“We would have preferred to restructure out of court, but we also understand that this essentially assures that it will get done,” he said.
In the 18 months since FairPoint purchased Verizon’s landline telephone and Internet business in northern New England the transition has been bumpy at best. Even before the financial concerns, FairPoint faced criticism over service and concerns that the company bit off more than it could chew. The company also has clashed with unionized workers, who opposed FairPoint’s initial takeover of Verizon’s business.
Nixon said he doesn’t blame Verizon for the problems FairPoint has faced, but he also has said that the broadband line changeover was a bigger undertaking than anyone could have imagined.
Amid the speed bumps, Nixon said FairPoint has maintained and followed through on its goals of creating local jobs, investing in broadband infrastructure and buying local products. Most agree that service has improved in recent months, but Nixon said the biggest goal going forward as the company restructures is to regain its reputation.
“We’ve called 1,700 businesses personally in the last two days,” he said. “All have thanked us for calling.”
Jeff Nevins, a FairPoint spokesman, said reaching out to FairPoint employees was crucial as well, because they are ambassadors of the company.
Nixon said that the financial restructuring plan through the Chapter 11 filing likely will take several months, but he said a number of creditors have been part of the negotiating process. State officials in Maine, New Hampshire and Vermont all have pledged to play an active role in FairPoint’s restructuring.
In the meantime, the FairPoint president said the company will continue reaching out to businesses, trying to attract new customers and build revenues.
More information about FairPoint’s restructuring plan is available online at www.fprestructuring.com or by calling 1-888-290-4881.