Monday, March 31, 2008

Verizon "Northern States" Deal is Complete with Fairpoint

Yesterday, the New Hampshire Public Utilities Commission held a last minute meeting to approve the Verizon sale of Maine, New Hampshire and Vermont to Fairpoint Communications. Regulators were concerned when they learned last week that Fairpoint had to spend an additional $17 million on bonds in order to finance the Verizon deal for the 3 states.

Today, a Verizon press release explained some detail on how the transaction has been handled. Here's a piece from that press release:

Verizon Communications Inc. (NYSE:VZ) today announced the completion of the spin-off of the shares of Northern New England Spinco Inc. (Spinco) to Verizon stockholders. Spinco held specified assets and liabilities that were used in Verizon's local exchange business and related activities in Maine, New Hampshire and Vermont. Immediately following the spin-off, Spinco merged with FairPoint Communications, Inc. (NYSE: FRP), resulting in Verizon stockholders collectively owning approximately 60 percent of FairPoint common stock.

Verizon stockholders are receiving one share of FairPoint common stock for every 53.0245 shares of Verizon common stock they owned as of March 7, 2008. This is equivalent to 0.0189 shares of FairPoint common stock for each share of Verizon common stock owned as of March 7, 2008. FairPoint will pay cash in lieu of any fraction of a share of FairPoint common stock.

Here's a brief summary of the deal collected from various sources:

Verizon received a $1.16 billion cash payment from Spinco
Verizon will receive
$551 million of 13 1/8% senior notes due in 2018 issued by Spinco
Verizon loses over $1.4 billion in debt

Verizon gets over $500 million in tax writeoffs

Fairpoint gets 1.6 million new landline customers

Fairpoint gets 230,000 new DSL customers
Fairpoint gets over 2,500 new employees from Verizon

Fairpoint becomes the eigth largest telecom company in the United States

It was a big effort for the 3 states, Fairpoint and Verizon to get this deal done.

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