FairPoint ‘teetering on the brink of bankruptcy’

Fri, 10/23/2009 - 8:40am
Clarke Canfield, The Associated Press

PORTLAND, Maine (AP) – Saddled by crippling debt, FairPoint Communications Inc. is asking its union employees in northern New England for pay cuts and other concessions as it seeks to avoid bankruptcy.

Company and union officials representing about 3,000 workers have met regularly in recent months to exchange information and discuss ways FairPoint can reduce costs, said FairPoint spokeswoman Rose Cummings. No announcements were made after a closed-door meeting Thursday in Boston.

The discussions come at a time when FairPoint is negotiating with lenders about restructuring its huge debt load. The Charlotte, N.C.-based company says it soon may be forced to file for Chapter 11 bankruptcy protection.

"We cannot sustain the current level of debt with the current business model," Cummings said. "So we have to reduce our debt and we have to improve efficiency and cut costs."

FairPoint owns and operates phone companies in 18 states with a total of 1.65 million lines, but its largest holdings by far are in Maine, New Hampshire and Vermont, where it bought Verizon's landlines and Internet services for $2.3 billion in 2008.

But since switching over to its own computer systems nine months ago, the company has been plagued with problems in filling orders and serving customers in the three states.

As the company struggles to fix the deficiencies, its revenues and subscriber base have been falling. In its last earnings report, the company reported a loss of $17.8 million for the three-month period that ended June 30.

Union employees are open to working with the company to improve its viability, said Rand Wilson, spokesman for the International Brotherhood of Electrical Workers and the Communications Workers of America. The two unions represent FairPoint employees in the region.

Typically, if the company and union leadership agree on a concessions package, the agreement would be taken to union members for a vote, he said.

"The company is teetering on the brink of bankruptcy," Wilson said. "That's been true for months and people have been saying it's not a matter of if, but a matter of when. But there's a feeling that it's about to happen."

Neither Wilson nor Cummings would discuss the details of any cost-cutting measures the two sides have discussed. But Cummings said FairPoint has conducted a wage analysis that concludes its union employees are paid above the market average in the region.

"Clearly for FairPoint, given our financial status, it's hard for us to pay above market for anything," she said.

When FairPoint first proposed buying Verizon's northern New England telephone lines and Internet operations, unions were among the most vocal opponents. Critics claimed FairPoint wasn't up to the task and suggested the deal was the equivalent of a mouse swallowing a cat.

Wilson said the unions are now committed to making FairPoint succeed.

"There's no satisfaction in saying, 'I told you so,'" he said.

If FairPoint is forced into bankruptcy, company officials have said customers won't be affected.

The phones and Internet would continue working, and the company would remain committed to expanding its high-speed Internet network in the region, the company says.

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