 japPremium
join:2003-08-10
038xx | reply to PoloDude
Re: Buy Back The email newsletter DSLprime, AKA Dave Burstein, reports that VZ holds the paper on their sale to Fairpoint. Who knew? Using "the" paper begs the question how much of "the" paper. Certainly not all. I feel confused.
How much credence to put in Mr. Burstein's report I cannot say. His missives are blurtations occasionally so unstructured as to make little sense to me. He comes off as too busy & involved with More Important Things than giving us his free Expert & Connected Insights. That said he may be the real deal, he may be a good Samaritan genius. My readings are very infrequent and no better assessment can I offer.
Here's the full text of his bit on Fairpoint etal's situation from the Tue, March 31, 2009 mailing:
Fairpoint, Hawaii and Charter Essentially Insolvent. Are BT, Qwest, CenturyTel, and Frontier Next?
Wireline only telcos are hurting badly, with Fairpoint having trouble meeting an interest payment. BT, Qwest, CenturyTel, Frontier and the other North American regionals face a similar problem: Minimal wireless, wireline dropping as much as 12%, DSL growth minimal as we approach saturation. Many of these companies made Charter’s error of paying $4,000 per line for acquisitions, far more than likely earnings can support.
BTand Qwest are among the worst-performing telcos, The growth of DSL for several years compensated for declining landlines, but with 70% of US and UK households connected there isn’t much more room for growth.
I wrote a little while ago “Fairpoint, the New England telco, fell 14% a few days after I told a friend to be cautious with his short position. That’s why I warn people I’m not an investment advisor, even as most of the analysts swap ideas with me. Any financial analysis shows them soon insolvent. They paid so much to Verizon for the lines it’s hard for them ever to cover the debt. However, Verizon is carrying the paper, and has no upside in forcing them into bankruptcy. In addition, they are pressing the states hard to get them what amounts to a federal bailout via USF, stimulus, or whatever works. Fairpoint stock dropped to a level that is nonsensical unless they face imminent bankruptcy, which they should be able to avoid. It rebounded 21% today - maybe folks are covering their shorts because there wasn't much room to go down much further.
My friend is one of the sharpest tech investors on the street, and can take risks like that. Most of us shouldn’t.” Since then, the stock has continued to plummet; the current price only makes sense if bankruptcy is imminent. I have to look further, but that seems unlikely. I was surprised S&P is maintaining a BB+ rating and was very late putting them on Creditwatch. Their debt to equity and other ratios have been scaring the street for a while. S&P needs to re-evaluate all the wireline only telcos. I’m not saying they will all follow Fairpoint and Hawaiian Tel, but I’d want to be very cautious here.
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