FairPoint Communications 2009 Annual Report Download - page 47

Table of Contents
for additional borrowing under our DIP Credit Agreement. On March 11, 2010, the Bankruptcy Court entered a final order in connection with the DIP
Credit Agreement, permitting the DIP Borrowers access to the total $75.0 million of the DIP Financing, subject to the terms and conditions of the DIP
Credit Agreement and related orders of the Bankruptcy Court. As of December 31, 2009, the Company had not borrowed any amounts under the DIP
Credit Agreement and letters of credit totaling $1.6 million had been issued under the DIP Credit Agreement.
Our overall leverage and the terms of our financing arrangements could:
•make it more difficult for us to satisfy our debt obligations;
•require us to dedicate a significant portion of our cash flow from operations to paying the principal of and interest on our indebtedness,
thereby limiting the availability of our cash flow to fund future capital expenditures, working capital and other corporate purposes;
•limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions;
•limit our ability to refinance our indebtedness on terms acceptable to us or at all;
•restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
•limit our flexibility in planning for, or reacting to, changes in our business and the communications industry generally;
•place us at a competitive disadvantage compared with competitors that have a less significant debt burden; and
•make us more vulnerable to economic downturns and limit our ability to withstand competitive pressures.
Our ability to continue to fund our debt requirements and to reduce debt may be affected by general economic, financial market, competitive,
legislative and regulatory factors, among other things. An inability to fund our debt requirements, reduce debt or satisfy debt covenant requirements
could have a material adverse effect on our business, financial condition, results of operations and liquidity.
In addition, a substantial portion of our indebtedness bears interest at variable rates. If market interest rates increase, variable-rate debt will create
higher debt service requirements, which could adversely affect our cash flow. While we may enter into agreements limiting our exposure to higher
interest rates, these agreements may not offer complete protection from this risk.
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We are a holding company and conduct no operations. Accordingly, our cash flow and our ability to make payments on, or repay or refinance, our
indebtedness, and to fund planned capital expenditures, dividends and other cash needs will depend largely upon the cash flows of our operating
subsidiaries and the payment of funds by those subsidiaries to us in the form of repayment of loans, dividends, management fees or otherwise.
Distributions to us from our subsidiaries will depend on their respective operating results and will be subject to restrictions under, among other things,
•the laws of their jurisdiction of organization;
•the rules and regulations of state and federal regulatory authorities;
•agreements of those subsidiaries, including agreements governing their indebtedness; and
•regulatory orders.
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