FairPoint Files Chapter 11; Cuts Deal With Banks; Existing Common Worthless

FairPoint Communications (FRP), which provides local phone service in parts of 18 states, this morning announced that it has filed for Chapter 11 bankruptcy protection as part of a financial restructuring plan with its banks. Under terms of the transaction, the company’s debt level will be reduced to about $1 billion from nearly $2.7 billion; about $1.1 billion of the debt will converted to at least 98% of the company’s equity. (The other 2%, under certain circumstances, could go to unsecured creditors.)

As for current holders of the company’s common stock, they are out of luck.

As the company notes in a filing detailing the restructuring plan, “existing equity interests inFairPoint Communications shall not receive or retain any interest or property,” which is to say they are worth bupkes.

Trading in FRP shares is halted; they last traded at 37 cents.