FairPoint sets talk on $2.03 billion facility as deal launches to SMAs

By Sara Rosenberg

New York, Feb. 29 - FairPoint Communications Inc. released price talk on its $2.03 billion senior secured credit facility (Ba3/BB+) in connection with the senior managing agent bank meeting that took place on Friday, according to a market source.

The $200 million six-year revolver, the $200 million one-year delayed-draw term loan, with seven-year final maturity, and the $1.13 billion seven-year term loan B are all being talked at Libor plus 275 basis points, and the $500 million six-year term loan A is being talked at Libor plus 250 bps, the source said.

There are two tiers of upfront fees towards the revolver, term loan A and delayed-draw term loan. Senior managing agents committing $60 million will get an upfront fee of 5%, while managing agents committing $40 million will get an upfront fee of 4%, the source added.

The revolver has a 37.5 bps unused fee and the delayed-draw term loan has a 75 bps unused fee for six months, stepping up to 125 bps thereafter.

The delayed-draw and funded term loan B debt have call protection of 102 in year one and 101 in year two against optional prepayments.

Financial covenants include a minimum cash interest coverage ratio of 2.50 to 1.00 and a maximum total leverage ratio of 5.50 to 1.00.

Lehman Brothers, Morgan Stanley, Bank of America, Deutsche Bank, Wachovia, Merrill Lynch and CoBank are the lead banks on the deal, with Lehman the left lead.

A retail bank meeting for the deal will take place on Thursday.

Proceeds will be used to help fund the merger with Verizon Communications Inc.'s wireline operations in Maine, New Hampshire and Vermont.

In the merger, FairPoint will issue about 53.8 million of its common shares to be distributed in a tax-free Reverse Morris Trust transaction to the shareholders of Verizon as well as assume roughly $1.7 billion of debt. The transaction will give FairPoint's shareholders 40% ownership and Verizon's shareholders 60% ownership of the combined company.

FairPoint is a Charlotte, N.C., provider of communications services to rural communities.

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