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FairPoint gets commitment for up to $2.08 billion credit facility
By Sara Rosenberg
New York, March 14 - FairPoint Communications Inc. has received a commitment for an up to $2.08 billion credit facility in connection with its planned merger with Verizon Communications Inc.'s wireline operations in Maine, New Hampshire and Vermont, according to a 10-K filed with the Securities and Exchange Commission Wednesday.
Lehman Brothers is rumored to be involved in the new credit facility.
The company said that the merger with the wireline operations will be funded with $1.7 billion in new debt and the issuance of 53.8 million shares of common stock to existing Verizon stockholders at an implied value of $18.88 per share, totaling $1.015 billion in equity.
This $1.7 billion of new debt will consist of bank debt and senior unsecured notes in proportions that have yet to be determined.
Proceeds from the credit facility will also be used to refinance FairPoint's existing bank debt.
Under the merger agreement, the wireline operations will pay a $900 million dividend to Verizon and will issue an about $800 million bond to Verizon, which Verizon may use to complete a debt-to-debt exchange.
The total transaction value for these Verizon operations is $2.715 billion.
FairPoint's shareholders will own about 40% of the combined company, while Verizon's shareholders will own about 60%.
The combined company will have a significantly stronger capital structure with a leverage ratio of about 4.1 times EBITDA at closing, compared to the current 4.5 times, and a dividend payout ratio of 60% to 70%, upon achievement of expected cost savings and synergies, compared to the current 86%.
FairPoint is a Charlotte, N.C., provider of communications services to rural communities.
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