FairPoint Communications 2005 Annual Report Download - page 21

· requiring a significant portion of our cash flow from operations to be dedicated to the payment of the principal and interest on our indebtedness,
thereby reducing funds available for future operations, acquisitions, dividends on our common stock and/or capital expenditures;
· making us more vulnerable to economic and industry downturns and conditions, including increases in interest rates; and
· placing us at a competitive disadvantage compared to those of our competitors that have less indebtedness.
Subject to certain covenants, our credit facility permits us to incur additional indebtedness. Any additional indebtedness that we may incur would
exacerbate the risks described above.


The Company is a holding company and conducts all of its operations through its operating subsidiaries. The Company currently has no significant
assets other than equity interests in its first tier subsidiaries. These first tier subsidiaries have no significant assets other than a direct or indirect equity interest
in the Company’s operating subsidiaries. As a result, the Company will rely on dividends and other payments or distributions from its operating subsidiaries
to pay dividends with respect to its common stock and to meet its debt service obligations generally. The ability of the Company’s subsidiaries to pay
dividends or make other payments or distributions to the Company will depend on their respective operating results and may be restricted by, among other
things:
· the laws of their jurisdiction of organization;
· the rules and regulations of state regulatory authorities;
· agreements of those subsidiaries;
· the terms of our credit facility; and
· the covenants of any future outstanding indebtedness the Company or its subsidiaries incur.
The Company’s operating subsidiaries have no obligation, contingent or otherwise, to make funds available to the Company, whether in the form of
loans, dividends or other distributions. In addition, we have a number of minority investments and passive partnership interests from which we receive
distributions. We do not control the timing or amount of distributions from such investments or interests and we may not have access to the cash flows of
these entities.
Accordingly, our ability to pay dividends with respect to shares of our common stock and to repay our credit facility at maturity or otherwise may be
dependent upon factors beyond our control. Subject to limitations in our credit facility, the Company’s subsidiaries may also enter into agreements that contain
covenants prohibiting them from distributing or advancing funds or transferring assets to the Company under certain circumstances, including to pay
dividends.


Covenants in our credit facility impose significant operating and financial restrictions on us. These restrictions prohibit or limit, among other things:
· the incurrence of additional indebtedness and the issuance by our subsidiaries of preferred stock;
· the payment of dividends on, and purchases or redemptions of, capital stock;
· a number of other restricted payments, including investments;
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