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FairPoint CEO asked to step down

Tue, 08/17/2010 - 8:15am
Dave Gram, The Associated Press

MONTPELIER, Vt. (AP) – FairPoint Communications' secured creditors have asked CEO David Hauser to resign, less than 14 months after he came aboard in a failed effort to steer the firm away from insolvency, the company said in bankruptcy court papers Monday.

The company said it was seeking approval to appoint Paul H. Sunu as its new chief executive.

"This is not unusual in a bankruptcy situation, where secured lenders like to put in their own person," said Hauser, a former chief financial officer at Duke Energy who came out of retirement to lead FairPoint.

He told The Associated Press he would stay on as a consultant to Sunu while the company emerges from Chapter 11 bankruptcy court protection.

FairPoint, which is based in Charlotte, N.C., got into trouble shortly after growing sixfold by buying the main landline networks in Maine, New Hampshire and Vermont from Verizon Communications for $2.3 billion. It initially bungled its efforts to take over the Verizon networks in the three states, and Hauser replaced former CEO Gene Johnson about six months later.

Complaints about billing, slow connections for new customers and other service problems were legion.

The company has proposed a plan to emerge from bankruptcy that involves cutting its debt from $2.7 billion to $1 billion and continuing its drive – acknowledged by regulators – to improve service to retail customers, as well as to other communications carriers that rely on its networks.

"I am very proud of what the employees of this company have done," Hauser said. "They really have turned this company around from the viewpoint of serving customers."

A snag in the company's plan has been the Vermont Public Service Board, which has yet to approve the plan. FairPoint needed approval from six of the 18 states where it operates.

In rejecting the plan June 28, the Vermont board said it found the company's projections for improving financial performance unconvincing. The company said last week it would file new information with the Vermont regulators in hopes of getting them to change their minds.

Failing that, it has left open the possibility of getting the U.S. Bankruptcy Court in New York to use the legal doctrine of federal preemption effectively to overturn the Vermont ruling.

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