FairPoint Communications 2009 Annual Report Download - page 9

Table of Contents
until October 30, 2009 if the Company failed to meet certain interest coverage ratio and leverage ratio covenants contained in the Pre-petition Credit
Facility for the period ended September 30, 2009.
In addition, the Company entered into certain forbearance agreements with the counterparties to the ISDA Master Agreement with Wachovia Bank,
N.A., dated as of December 12, 2000, as amended and restated as of February 1, 2008, and the ISDA Master Agreement with Morgan Stanley Capital
Services Inc., dated as of February 1, 2005 (collectively, the "Swaps").
Following the execution of the forbearance agreements described above, the Company engaged in extensive negotiations with a steering committee
of its pre-petition secured lenders (the "Steering Committee") regarding a recapitalization of the Company's significant indebtedness. Subsequently, the
Company and the Steering Committee reached agreement on the Plan Support Agreement described herein.
As a result of the restatement of the Company's condensed consolidated financial statements for the period ended June 30, 2009, as set forth in a
Quarterly Report on Form 10-Q/A dated April 30, 2010, the Company determined that the Company was not in compliance with the interest coverage
ratio maintenance covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30,
2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default
under the Notes, in each case at June 30, 2009.
Plan Support Agreement
In anticipation of the Chapter 11 Cases, the Company entered into a Plan Support Agreement (the "Plan Support Agreement"), dated as of
October 25, 2009, with secured lenders (the "Consenting Lenders") holding more than 50% of the outstanding debt under the Pre-petition Credit
Facility. Pursuant to the Plan Support Agreement, the Consenting Lenders agreed, subject to the terms and conditions contained in the Plan Support
Agreement, to support the Company's proposed financial restructuring described in the FairPoint Communications, Inc. and Affiliates Chapter 11 Plan
Term Sheet (the "Plan Term Sheet"), which was attached as an exhibit to the Plan Support Agreement. The Plan Term Sheet, among other things,
provided the framework for a comprehensive balance sheet restructuring of the Company that would result in the conversion of more than $1.7 billion
of debt into equity, consisting of $1.2 billion of debt under the Pre-petition Credit Facility and all of the outstanding Notes.
Pursuant to the Plan Support Agreement, the Company committed to the achievement of certain milestones, including obtaining an order by the
Bankruptcy Court confirming a Chapter 11 plan of reorganization reflecting the proposed financial restructuring described in the Plan Term Sheet on or
before 5:00 P.M. Eastern Time on July 8, 2010. Our failure to achieve these milestones by the dates required under the Plan Support Agreement would
(unless duly waived or extended) constitute a termination event under the Plan Support Agreement, pursuant to which the Consenting Lenders agreed to
support such a plan, that could allow the Consenting Lenders to terminate their obligations to support the Plan.
The Plan
The Plan contemplates the reorganization of the Company and the discharge of all outstanding claims against and interests in the Company.
Following the Petition Date, an ad hoc committee of the holders of the Notes raised certain concerns regarding the proposed treatment of holders of
unsecured claims against FairPoint Communications ("FairPoint Communications Unsecured Claims") under the Plan Term Sheet. In an effort to
resolve these concerns, and after extensive negotiations, certain changes were made to the
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