Fructivore Investments

Well, it’s official: Fairpoint has filed for bankruptcy. As Moyer’s Distressed Debt Investing states, the actual filing of a Chapter 11 is never a surprise. Although it may seem curious that its creditors reduced the size of their claim from 2.7 billion to 1 billion, the reality is that the creditors are going to become the beneficial owners of Fairpoint no matter what the size of their claim. In fact, most bankruptcies involve some pre-filing negotiations of this type and it is rare but not impossible that these early maneuvers obviate the need for bankruptcy, although they did not in this case.

I still haven’t seen anything to confirm the rumor that Windstream is buying up Fairpoint’s debts in order to carry some of Fairpoint’s more lucrative operations. But I will repeat the necessity of caution; buying more than one could afford was what killed Fairpoint to begin with–how anyone can expect a telephone company to pay off a debt at 13% interest is beyond me.

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Investing, law by grocca