FairPoint Communications 2010 Annual Report Download - page 98

Table of Contents
In addition, as a result of the 2009 Restatement, 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 Pre-
Petition Notes, in each case at June 30, 2009.
The Pre-Petition Credit Facility also contained restrictions on the Company’s ability to pay dividends on its common stock.
The Pre-Petition Credit Facility was guaranteed, jointly and severally, by all existing and subsequently acquired or organized wholly owned first-tier
domestic subsidiaries of the Company that are holding companies. No guarantee was required of a subsidiary that is an operating company. Northern New
England Telephone Operations LLC, Telephone Operating Company of Vermont LLC and Enhanced Communications of Northern New England Inc. are
regulated operating subsidiaries and, accordingly, are not guarantors under the Pre-Petition Credit Facility.
The Pre-Petition Credit Facility was secured by a first priority perfected security interest in all of the stock, equity interests, promissory notes, partnership
interests and membership interests owned by the Company.
The Pre-Petition Credit Facility was terminated on the Effective Date.
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On March 31, 2008, Spinco issued $551.0 million aggregate principal amount of the Old Notes. The Old Notes were set to mature on April 1, 2018 and
were not redeemable at the Company’s option prior to April 1, 2013. Interest was payable on the Old Notes semi-annually in cash on April 1 and October 1 of
each year. The Old Notes bear interest at a fixed rate of 13 1/8% and principal was due at maturity. The Old Notes were issued at a discount and, accordingly,
at the date of their distribution, the Old Notes had a carrying value of $539.8 million (principal amount at maturity of $551.0 million less discount of
$11.2 million). Following the filing of the Chapter 11 Cases, $9.9 million of discount on the Pre-Petition Notes was written off in order to adjust the carrying
amount of the Company’s pre-petition debt to the Bankruptcy Court approved amount of the allowed claims for the Company’s pre-petition debt.
Upon the consummation of the Exchange Offer and the corresponding consent solicitation, substantially all of the restrictive covenants in the indenture
governing the Old Notes were deleted or eliminated and certain of the events of default and various other provisions contained therein were modified.
Prior to the filing of the Chapter 11 Cases, the Company failed to make the October 1, 2009 interest payment on the Pre-Petition Notes. The failure to make
the interest payment on the Pre-Petition Notes constituted an event of default under the Pre-Petition Notes upon the expiration of a thirty day grace period. An
event of default under the Pre-Petition Notes permits the holders of the Pre-Petition Notes to accelerate the maturity of the Pre-Petition Notes.
In addition, as a result of the 2009 Restatement, 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 Pre-
Petition Notes, in each case at June 30, 2009.
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On July 29, 2009, the Company successfully consummated the Exchange Offer. On the Settlement Date, the Proposed Amendments became operative and
$439.6 million in aggregate principal amount of the Old Notes (which amount was equal to approximately 83% of the then outstanding Old Notes) were
exchanged for $439.6 million in aggregate principal amount of the New Notes. In addition, pursuant to the terms of the Exchange Offer, an additional
$18.9 million in aggregate principal amount of New Notes was issued to holders who tendered their Old Notes in the Exchange Offer as payment for accrued
and unpaid interest on the exchanged Old Notes up to, but not including, the Settlement Date.
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