FairPoint Communications 2005 Annual Report Download - page 39

the billing conversion, this potential sale raised concerns about the long-term reliability of the service bureau. On November 7, 2005, we reached an agreement
with this outsourced service bureau to transition to another service provider of our choice by December 31, 2006. As part of this settlement, we will receive
$4.0 million in cash as compensation from the outsourced billing provider in order to relieve it from its responsibilities under the original service bureau
contract. In addition, we do not have to pay an additional $1.1 million which was scheduled to be paid to the service provider. We have selected MACC as our
new provider of billing services. We expect to complete the conversion of 17 of our operating companies, or approximately two thirds of our access lines, by
the middle of 2006 and the remaining companies by the middle of 2007.
Our dividend policy reflects our judgment that our stockholders would be better served if we distributed a substantial portion of the cash generated by
our business in excess of operating needs, interest and principal payments on our indebtedness, dividends on future senior classes of our capital stock, if any,
capital expenditures, taxes and future reserves, if any, as regular quarterly dividend payments to the holders of our common stock, rather than retained and
used such cash for other purposes.
We are subject to regulation primarily by federal and state governmental agencies. At the federal level, the FCC has jurisdiction over interstate and
international communications services. State telecommunications regulators exercise jurisdiction over intrastate communications services.
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On February 8, 2005, we consummated our initial public offering of 25,000,000 shares of our common stock at a price to the public of $18.50 per
share. In connection with the offering, we entered into a new senior secured credit facility with a syndicate of financial institutions, including Deutsche Bank
Trust Company Americas, as administrative agent, which we refer to as our credit facility.
We used the gross proceeds of $462.5 million from the offering together with borrowings of $566.0 million under the term facility of our credit facility
as follows:
· $176.7 million to repay in full all outstanding loans under our old credit facility (including accrued interest);
· $122.1 million to repurchase $115.0 million aggregate principal amount of our 9 % senior subordinated notes due 2008, which we refer to as the 9
% notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);
· $51.8 million to repurchase $50.8 million aggregate principal amount of our floating rate callable securities due 2008, which we refer to as the floating
rate notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);
· $193.4 million to repurchase $173.1 million aggregate principal amount of our 12 % senior subordinated notes due 2010, which we refer to as the
12 % notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);
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