Nov 4 (Reuters) - A group of creditors of rural telecom services provider FairPoint Communications Inc FRCMQ.PK have asked the judge to appoint an examiner to probe factors that led to the company's bankruptcy late last month, court filings showed.
The Ad Hoc Committee of FairPoint Noteholders, so-called because a creditors committee is yet to be named by the court, said in a motion last Friday that the company’s actions leading up to the bankruptcy reveal a pattern of misrepresentation and questionable decision-making that merits an investigation by an independent third party.
“The Ad Hoc Committee has had to learn the hard way that the representations made by these debtors (FairPoint) and their management must be taken with a large grain of salt,” the filing said.
FairPoint was not immediately available for comment.
The committee sought a probe into FairPoint's leveraged acquisition of Verizon's VZ.N landline operations in Maine, New Hampshire and Vermont in January 2007.
Technical and operational difficulties following the Verizon deal, a $23 million dividend payout and the decision to appoint a chief executive with no experience in the telecommunications industry were the other issues on which the committee sought an investigation.
A hearing on the matter is scheduled for Nov. 18.
FairPoint filed for Chapter 11 bankruptcy on Oct. 26, under a pre-arranged plan that would cut its debt by $1.7 billion and almost fully transfer ownership to certain lenders.
The committee also alleged that FairPoint’s management was seeking to maximize their personal gains by aligning with pre-petition credit agreement lenders to “squeeze out” senior noteholders.
Under the pre-packaged bankruptcy, FairPoint’s management would get up to 10 percent equity in the reorganized company while senior noteholders would be left with 2 percent equity and out-of-the-money warrants, the committee alleged.
The case is In re: FairPoint Communications Inc, U.S. Bankruptcy Court, Southern District of New York (Manhattan) No: 09-16335. (Reporting by Santosh Nadgir in Bangalore; Editing by Jarshad Kakkrakandy)
Our Standards: The Thomson Reuters Trust Principles.