February 8, 2010 / 4:01 PM / 9 years ago

UPDATE 2-FairPoint aims to cut debt by two-thirds

* Some claim holders to get 87.9 cents on the dollar

* Current shareholders wiped out (Recasts to include details on cutting debt by two-thirds, adds details on company ownership)

NEW YORK, Feb 8 (Reuters) - Telecommunications provider FairPoint Communications Inc FRCMQ.PK on Monday filed a delayed plan of reorganization that calls for cutting debt by about two-thirds and distributing millions of new shares to claim holders.

The company proposed cutting $1.8 billion in debt and issuing millions of new shares, subject to creditor and bankruptcy court approval.

The rural telecom services provider still expects to emerge from bankruptcy “sometime this year,” said spokeswoman Rose Cummings.

The company said in court filings that $2.1 billion in allowed pre-petition credit agreement claims could expect a recovery of about 87.9 cents on the dollar in cash and new shares.

The largest class of unsecured creditors will receive stock and other instruments, representing an 8-percent stake in the company, said Cummings. The recovery represents about 17 cents on the dollar.

Subject to certain conditions, some 47 million new common shares will be distributed to holders of Class 4 pre-petition credit agreement claims, and 4 million shares will be distributed to Class 7 unsecured claim holders.

Current shareholders would be wiped out.

FairPoint filed for Chapter 11 bankruptcy protection on Oct. 29, citing the need to cut debt after a costly acquisition and the loss of wireline voice customers due to competition from other communications providers.

The company, at the time of the filing, had about $2.7 billion in debt, due in part to its March, 2008, purchase of some landline operations in Maine, Vermont and New Hampshire from Verizon Communications. (VZ.N)

In a court filing, the company also said it plans to invest more than $100 million over the next two years to build out its next-generation Internet protocol-based network.

“We remain confident that FairPoint will emerge as a stronger more viable company, and we remain committed to our long-term goal of becoming the preferred communications provider for business and residential customers in all of our markets,” said Cummings.

David Hauser will remain chairman and chief executive officer, the company said in court documents.

The case is In re: FairPoint Communications Inc, U.S. Bankruptcy Court, Southern District of New York (Manhattan) No: 09-16335. (Reporting by Chelsea Emery; additional reporting by Santosh Nadgir in Bangalore and Jon Stempel in New York; editing by John Wallace and Gunna Dickson)

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