Commenting on article found at www.billingworld.com/articles/business-finance/fairpoint-ordered-to-pay-rebates-to-customers.html

Generally in any bankruptcy, the secured creditors usually end up profiting from any restructuring of assets. Unsecured creditors and equity holders usually get next to nothing or nothing at all. Customers are almost always ignored; hence class action suits from customers. This is all within the boundaries of the law. However, all that can change on a dime when the courts say so and this is one of those instances when the courts said “the customers matter.” Good for consumers. Thank you Judge.

The journey is not over for Fairpoint. Even after a Plan of Reorganization (PoR) is filed and approved, the bankrupt company needs to execute to the PoR. The execution part assumes that the company will emerge healthier than before and capable of being a viable company. Well, we shall see. One of the issues that got Fairpoint in trouble was its lack of back office integrity. Part of the back office issues involved network asset locations and identifications as it related to the operating network. Insufficiently and poorly populated databases led to billing snafus and network management snafus. I doubt that anyone has spent the last few months repopulating the databases. I am fairly certain that every surviving employee has been worrying about their job.

To deal with the restructured and reduced debt, you can bet your bottom dollar that it will involve the sale of territory. In other words, parts of the company’s will have to be sold off to raise money to pay down debt.

What Fairpoint is facing is a very long and arduous effort. This is when most investment bankers and secured creditors involved in the deal take a deep breath and a sigh of relief. Unfortunately, they are wrong. All that has been done is a financial restructuring of the company. The root problems that caused Fairpoint’s troubles still exist. Worse yet, the management team that got the company in trouble are largely still there. This spells “T-R-O-U-B-L-E” (TROUBLE) not “RELIEF”.

What Fairpoint will need going forward are not financial restructuring people but operational restructuring experts who can truly add value in turning around the company.

A great deal of thought needs to be given to what is done next. My advice to secured creditors is: Take matters into your own hands and aggressively serve all stakeholders and customers by bringing in operational restructuring experts. Unless this is done you are going to be looking at a total failure to execute. With outside experts Fairpoint stands a better chance of surviving and thriving. Of course if the company’s problems are so deep that not even an operational restructuring expert can save the company, next year we will be seeing Fairpoint getting auctioned off.