FairPoint Communications 2009 Annual Report Download - page 75

Table of Contents
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On October 26, 2009, we filed the Chapter 11 Cases. The matters described herein, to the extent that they relate to future events or expectations,
may be significantly affected by the Chapter 11 Cases. The Chapter 11 Cases involve various restrictions on our activities, limitations on financing, the
need to obtain Bankruptcy Court approval for various matters and uncertainty as to relationships with others with whom we may conduct or seek to
conduct business. As a result of the risks and uncertainties associated with the Chapter 11 Cases, the value of our securities and how our liabilities will
ultimately be treated is highly speculative. We urge that appropriate caution be exercised with respect to existing and future investments in any of the
liabilities and/or securities of the Company. See "Part 1—Item 1. Business—Chapter 11 Cases" for a further description of the Chapter 11 Cases, the
impact of the Chapter 11 Cases, the proceedings in Bankruptcy Court and our status as a going concern. In addition, see "Part I—Item 1A. Risk
Factors."
Our short term and long term liquidity needs arise primarily from: (i) interest and principal payments on our indebtedness; (ii) capital expenditures;
and (iii) working capital requirements as may be needed to support and grow our business. Notwithstanding the direct impact of the Chapter 11 Cases
on our liquidity, including the stay of payments on our indebtedness, our current and future liquidity is greatly dependent upon our operating results.
We expect that our primary sources of liquidity during the pendency of the Chapter 11 Cases will be cash flow from operations, cash on hand and funds
available under the DIP Credit Agreement. We expect that after the Effective Date, our short term and long term liquidity needs will continue to arise
primarily from: (i) interest and principal payments on our indebtedness; (ii) capital expenditures; and (iii) working capital requirements as may be
needed to support and grow our business. We expect that our primary sources of liquidity after the Effective Date will be cash flow from operations,
cash on hand and funds available under the Exit Facility Loans.
The Chapter 11 Cases were filed to gain liquidity for our continuing operations while we restructure our balance sheet to allow us to be a viable
going concern. Our continuation as a going concern is contingent upon, among other things, our ability: (i) to comply with the terms and conditions of
the DIP Credit Agreement; (ii) to obtain confirmation of the Plan under the Bankruptcy Code; (iii) to generate sufficient cash flow from operations; and
(iv) to obtain financing sources to meet our future obligations. We believe the consummation of a successful restructuring under the Bankruptcy Code is
critical to our continued viability and long-term liquidity. While we believe we will be able to achieve these objectives through the Chapter 11
reorganization process, there can be no certainty that we will be successful in doing so.
In connection with the Chapter 11 Cases, the DIP Borrowers entered into the DIP Credit Agreement. The DIP Credit Agreement provides for a
revolving facility in an aggregate principal amount of up to $75 million, of which up to $30 million is also available in the form of one or more letters of
credit that may be issued to third parties for the account of the Company and its subsidiaries. Pursuant to the Interim Order, the DIP Borrowers were
authorized to enter into and immediately draw upon the DIP Credit Agreement on an interim basis, pending a final hearing before the Bankruptcy Court
on November 18, 2009, in an aggregate amount of $20 million. 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 million of the DIP Financing, subject to the terms and conditions of the
DIP Credit Agreement and related orders of the Bankruptcy Court. For a further description of the DIP Credit Agreement and the terms thereof, see
"Part 1—Item 1. Business—Chapter 11 Cases—Debtor-in-Possession Financing." Upon satisfaction of certain conditions precedent, including the
Company successfully exiting from the Chapter 11 Cases, the DIP Financing will roll into a new revolving credit facility with a five-year term. 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.
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