FairPoint Communications tenders for 2008 and 2010 notes

By Paul Deckelman

New York, Jan. 5 - FairPoint Communications Inc. said that it has begun cash tender offers for all four series of its outstanding notes and is soliciting noteholder consents to proposed changes in the respective indentures. The tender offers and consent solicitations cover FairPoint's 9½% senior subordinated notes due 2008, its floating-rate callable securities due 2008, its 12½% senior subordinated notes due 2010 and its 11 7/8% senior notes due 2010.

The company set 5 p.m. ET on Jan. 20 as the consent deadline for the offers and said they would expire at 5 p.m. ET on Feb. 3, with both deadlines subject to possible extensions.

FairPoint, a Charlotte, N.C.-based provider of telecommunications services to rural markets, said that the purchase price for the 9½% notes would be $1,015.42 per $1,000 principal amount. The purchase price for the floating-rate securities would be $982.50 per $1,000 principal amount.

The purchase price for the 12½% notes will be calculated based on a formula employing a 50 basis point fixed spread over the yield on the price determination date of a reference security, the 1 5/8% U.S. Treasury note coming due April 30, as well as using a present value on the prospective settlement date for the notes of $1,062.50 per $1,000 principal amount, the amount payable on the first call date, and all scheduled interest payments from the settlement date to May 1.

The purchase price for the 11 7/8% notes will be calculated based on a formula employing a 50 basis point spread over the yield on the pricing date of the reference security, the 2¼% U.S. Treasury note due Feb. 15, 2007, as well as using the sum of (a) 35% of $1,118.75 per $1,000 principal amount of the 11 7/8% notes (the equity clawback amount for the 11 7/8% notes under their indenture), and (b) 65% of the present value on the settlement date of $1,059.38 per $1,000 principal amount (the amount payable on the first call date) and all scheduled interest payments from the settlement date to March 1, 2007.

Holders tendering their notes and providing consents by the consent deadline will receive a consent payment of $20 per $1,000 principal amount. Holders tendering their notes after the consent deadline will not receive the consent payment. All tendering noteholders will also receive accrued and unpaid interest up to but not including the settlement date.

Notes tendered and consents delivered may be withdrawn or revoked up to but not after the consent deadline, which is also the withdrawal deadline.

The company said that among other things, the proposed indenture amendments would eliminate most of the respective indentures' principal restrictive covenants and would amend certain other provisions. Adoption of the amendments will require the consent of the holders of at least a majority of outstanding principal amount of the 12½% notes, a majority of the outstanding principal amount of the 11 7/8% notes, and a majority of the total outstanding principal amount of the two series of 2008 notes - the 9½% notes and the floating-rate callable securities - voting as a single class. Holders who tender their notes will be required to also consent to the proposed amendments, and holders may not deliver consents to the proposed amendments without also tendering their notes.

FairPoint said the tender offers are subject to several conditions, including, among other things, its completion of its proposed initial public offering of common stock and obtaining a new senior secured credit facility; a minimum tender condition; and a required consents and execution of the supplemental indentures condition. FairPoint expects to complete the initial public offering of its common stock and obtain a new senior secured credit facility on or prior to the expiration date of the tender offers.

Banc of America Securities LLC is the dealer manager and solicitation agent (888 292-0070 or 212 847-5834). Global Bondholder Services Corp. is the information agent (212 430-3774).

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