UPDATE 2-FairPoint files for bankruptcy, lenders to take control

* Lenders to get near full ownership of Co

* Restructuring plan to convert $1.1 bln debt into equity

* Says plan will cut debt by $1.7 bln

* Gets commitments for $75 mln DIP loan (Recasts; Adds details from court filings, background)

By Santosh Nadgir

BANGALORE, Oct 26 (Reuters) - Rural telecom services provider FairPoint Communications Inc (FRCMQ.PK) filed for Chapter 11 bankruptcy, under a pre-arranged plan that would cut its debt by $1.7 billion and almost fully transfer its ownership to lenders.

The plan will convert about $1.1 billion of the company's debt into equity.

The restructuring plan has the support of lenders holding more than 50 percent of outstanding debt under its secured credit facility, the Charlotte, North Carolina-based company said in a statement.

FairPoint has also received commitments for a $75 million debtor-in-possession (DIP) loan and has about $46 million in cash to continue operations while in bankruptcy.

"The day-to-day operations of our business will not be impacted by today's actions," Chief Executive David Hauser said.

In its Chapter 11 filing, the company listed total assets of about $3.24 billion and debt of about $3.23 billion.

FairPoint said its annual interest expenses would be reduced from more than $200 million to about $65 million.

In January 2007, the company borrowed $2.7 billion to fund its acquisition of Verizon's (VZ.N) landline operations in Maine, New Hampshire and Vermont.

Increased competition and the economic downturn made it impossible for the company to service the debt, Chief Financial Officer Alfred Giammarino said in court filings.

FairPoint posted a net loss of $17.8 million for the second quarter of 2009, compared with a net income of $23.1 million in the year-ago quarter.

With about 1.7 million access line equivalents, FairPoint is the seventh largest local telephone company in the United States.