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 Bondholders of FairPoint Communications Inc. say they were jilted in the talks that led to the company's bankruptcy deal with banks, and they argue that the court should appoint an examiner to investigate matters.FairPoint struggled after buying telecom systems in New England from Verizon Communications Inc. (NYSE:VZ) for $2.4 billion in 2008. The Charlotte, N.C., telecom entered talks with noteholders over the summer. FairPoint then took up negotiations with lenders, who would get most of the equity in the reorganized company as part of a late-October agreement. Pleadings by Kris Hansen of Stroock & Stroock & Lavan LLP, counsel for a committee of noteholders, state: It appears that the Debtors' management has seen fit to maximize their personal gain by aligning with their prepetition credit agreement lenders to squeeze out the holders of the Senior Notes, having negotiated for themselves up to 10% of the equity of the reorganized company in the form of restricted stock and options grants under a long-term incentive program, in addition to a "key employee incentive program," the terms of which are as yet undisclosed. The noteholders' criticize a number of matters, including a $23 million dividend payment the company made in January and a "death trap mechanism" that would give noteholders a sliver of equity, only if they support FairPoint's deal with its banks. "This is a complex legal process, which is expected to take a number of months," a FairPoint spokeswoman said. She added, "We adamantly dispute the allegations in the motion filed by the ad hoc committee of bondholders, and we will deal with these allegations in due course through the bankruptcy court process. We do not intend to further publicly comment on these allegations at this time." A hearing is set for Nov. 18, in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. - Chris Nolter
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