Cash flow problems lower FairPoint rating
Fitch Ratings has lowered its outlook for FairPoint Communications Inc., citing higher-than-expected access line losses that have affected its cash flow and required more borrowing.
The ratings agency reduced the Charlotte, N.C.-based FairPoint's outlook from "Stable" to "Negative," and downgraded its issuer default rating and its $551 million senior unsecured notes due 2018 from "BB-" to "B+," according to a press release from Fitch. Fitch says operational trends, combined with anticipated capital spending and FairPoint's high dividend payout, have reduced the company's financial flexibility in 2009 to a level below previous expectations.
FairPoint purchased Verizon's landline operation in Maine, Vermont and New Hampshire last March for $2.7 billion. Fairpoint intends to begin switching from the Verizon systems to its own Jan. 31, which is expected to save about one-third of the $16 million per month it was paying Verizon to use its systems through the acquisition process.
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