FairPoint Communications 2004 Annual Report Download - page 60

Borrowings under our credit facility will bear interest at variable interest rates. Accordingly, if any of the base reference interest rates for
the borrowings under our credit facility increase, our interest expense will increase, which could negatively impact our ability to pay dividends
on our common stock. In connection with the offering, we entered into three interest rate swap agreements which fixed the interest rates on a
substantial portion of the term loans under our credit facility for a period of approximately three to five years after the closing of the offering.
After the interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to
year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. If we choose to enter into a
new interest rate swap or purchase an interest rate cap or other interest rate hedge in the future, the amount of cash available to pay
dividends on our common stock may decrease. However, to the extent interest rates increase in the future, we may not be able to enter into a
new interest rate swap or purchase an interest rate cap or other interest rate hedge on acceptable terms.
In addition, prior to the maturity of our credit facility, we will not be required to make any payments of principal on our credit facility, and it
is not likely that we will generate sufficient funds from operations to repay the principal amount of our indebtedness at maturity. We therefore
will need to refinance our debt. We may not be able to refinance our credit facility, or if refinanced, the refinancing may occur on less favorable
terms, which may materially adversely affect our ability to pay dividends. If we were unable to refinance our credit facility, our failure to repay
all amounts due on the maturity date would cause a default under our credit facility. We expect our required principal repayments under the
term loan facility of our credit facility to be approximately $588.5 million at its maturity in February 2012. Our interest expense may increase
significantly if we refinance our credit facility on terms that are less favorable to us than the terms of our credit facility.
We may also be forced to raise additional capital or sell assets and, if we are forced to pursue any of these options under distressed
conditions, our business and the value of your investment in our common stock could be adversely affected. In addition, these alternatives
may not be available to us when needed or on satisfactory terms due to prevailing market conditions, a decline in our business, legislative
and regulatory factors or restrictions contained in the agreements governing our indebtedness.
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
If we do not have sufficient cash to fund dividend payments, we would either reduce or eliminate dividends or, to the extent we were
permitted to do so under our credit facility and the agreements governing future indebtedness we may incur, fund a portion of our dividends
with borrowings or from other sources. If we were to use working capital or permanent borrowings under our credit facility's revolving facility
to fund dividends, we would have less cash available for future dividends and other purposes, which could negatively impact our financial
condition, our results of operations and our ability to maintain or expand our business.
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 
As of December 31, 2004, after giving effect to the transactions, we would have had approximately $592.8 million of total consolidated
indebtedness. Our substantial indebtedness could have important adverse consequences to the holders of our common stock, including:
•limiting our ability to pay dividends on our common stock or make payments in connection with our other obligations,
including, under our credit facility;
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