FairPoint Communications 2010 Annual Report Download - page 99

Table of Contents
The New Notes mature on April 2, 2018 and bear interest at a fixed rate of 13?%, payable in cash, except that the New Notes bore interest at a rate of 15%
for the period from July 29, 2009 through and including September 30, 2009. In addition, the Company was permitted to pay the interest payable on the New
Notes for the Initial Interest Payment Period in the form of cash, by capitalizing such interest and adding it to the principal amount of the New Notes or a
combination of both cash and such capitalization of interest, at its option. The Company intended to make the $12.2 million interest payments due on
October 1, 2009 on the New Notes by capitalizing such interest and adding it to the principal amount of the New Notes. As the Pre-Petition Notes have been
classified as subject to compromise as of December 31, 2009, the Company has classified the accrued interest on the exchanged Old Notes as of December 31,
2009 of $12.2 million as subject to compromise on the consolidated balance sheet. In accordance with the Reorganizations Topic of the ASC, as interest on the
Pre-Petition Notes subsequent to the Petition Date is not expected to be an allowed claim, the Company has not accrued interest expense on the Pre-Petition Notes
subsequent to the Petition Date.
The Indenture, dated as of July 29, 2009, by and between FairPoint Communications, Inc. and U.S. Bank National Association (the “New Indenture”)
limits, among other things, the Company’s ability to incur additional indebtedness, issue certain preferred stock, repurchase its capital stock or subordinated
debt, make certain investments, create certain liens, sell certain assets or merge or consolidate with or into other companies, incur restrictions on the ability of
the Company’s subsidiaries to make distributions or transfer assets to the Company and enter into transactions with affiliates.
The New Indenture also restricts the Company’s ability to pay dividends on or repurchase its common stock under certain circumstances.
As a result of the Chapter 11 Cases, the Company did not make any principal or interest payments on its pre-petition debt during the year ended
December 31, 2010. During the year ended December 31, 2009, the Company repurchased $19.9 million in aggregate principal amount of the Old Notes for
an aggregate purchase price of $6.3 million in cash. In total, including amounts repaid under the Term Loan A Facility and Term Loan B Facility, the
Company retired $34.5 million of outstanding debt during the year ended December 31, 2009.
In connection with the Exchange Offer and the corresponding consent solicitation, the Company also paid a cash consent fee of $1.6 million in the
aggregate to holders of Old Notes who validly delivered and did not revoke consents in the consent solicitation prior to a specified early consent deadline,
which amount was equal to $3.75 in cash per $1,000 aggregate principal amount of Old Notes exchanged in the Exchange Offer.
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, the
filing of the Chapter 11 Cases constituted an event of default under the New 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.
The Pre-Petition Notes were terminated on the Effective Date.
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DIP Credit Agreement
In connection with the Chapter 11 Cases, the FairPoint Communications and FairPoint Logistics, Inc. (“FairPoint Logistics,” and together with FairPoint
Communications, the “DIP Borrowers”) entered into the Debtor-in-Possession Credit Agreement, dated as of October 27, 2009 (“DIP Credit Agreement”) with
certain financial institutions (“DIP Lenders”) and the Administrative Agent. The
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