FairPoint Communications 2011 Annual Report Download - page 84

Table of Contents
(c) The carrying values of certain liabilities subject to compromise were adjusted to the value of the claim allowed by the Bankruptcy Court.
(d) Net gains and losses associated with the settlement of liabilities subject to compromise, of which $1,351,055 was recognized on the Effective Date.
(e) Revaluation of long lived assets and certain assets and liabilities upon adoption of fresh start accounting.
(f) Includes expenses associated with the Long Term Incentive Plan, the Litigation Trust and the write off of the predecessor company’s long term incentive
plan and director and officer policy.
Professional fees directly associated with the reorganization process that have been incurred after the Effective Date are included in operating expenses as
Reorganization related expense in the consolidated statement of operations.
Liabilities Subject to Compromise
Liabilities subject to compromise refer to liabilities incurred prior to the Petition Date for which the Company has not received approval from the
Bankruptcy Court to pay or otherwise honor. The amounts of the various categories of liabilities that are subject to compromise are set forth below. These
amounts represent the estimates of known or potential Pre-Petition Date claims that are likely to be resolved in connection with the Chapter 11 Cases.
At the Effective Date, all liabilities subject to compromise were either settled through issuance of cash, shares of New Common Stock or Warrants, or
were included in the Company’s claims payable and estimated claims accrual (the “Claims Reserve”). As such, as of the Effective Date, no liabilities remain
subject to compromise. Liabilities subject to compromise at December 31, 2010 consisted of the following (amounts in thousands):


Senior secured credit facility $1,970,963
Senior Notes 549,996
Interest rate swap 98,833
Accrued interest 211,550
Accounts payable 57,640
Other accrued liabilities 16,129
Other long-term liabilities 200
Liabilities subject to compromise $2,905,311
Liabilities not subject to compromise include: (1) liabilities incurred after the Petition Date; (2) Pre-Petition Date liabilities that the Company expects to
pay in full such as medical or retirement benefits; and (3) Pre-Petition Date liabilities that have been approved for payment by the Bankruptcy Court and that
the Company expects to pay (in advance of a plan of reorganization) in the ordinary course of business, including certain employee-related items such
as salaries and vacation pay.
Magnitude of Potential Claims
The Company has filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the Company’s
assets and liabilities, subject to the assumptions filed in connection therewith. All of the schedules are subject to amendment or modification.
Bankruptcy Rule 3003(c)(3) requires the Bankruptcy Court to set the time within which proofs of claim must be filed in a Chapter 11 case. The
Bankruptcy Court established March 18, 2010 at 5:00 p.m. Eastern Time (the “General Bar Date”) as the last date and time for all non-governmental entities
to file a proof of claim against the Debtors and April 26, 2010 at 5:00 p.m. Eastern Time (the “Governmental Bar Date”, and together with the General Bar
Date, the “Bar Dates”) as the last date and time for all governmental entities to file a proof of claim against the Company. Subject to certain exceptions, the Bar
Dates apply to all claims against the Debtors that arose prior to the Petition Date. As further provided in the Plan and the Confirmation Order, March 25, 2011
was the last date and time for the filing of a claim for unpaid post-petition claims.
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