本文发表在 rolia.net 枫下论坛FairPoint's Giammarino, Just Days on Job, Shifts Funds, Woos Backers -- and Worries
By TIMOTHY AEPPEL
SCOTTSDALE, Ariz. -- These are dark days for America's chief financial officers.
Alfred Giammarino took that post at FairPoint Communications Inc. a month ago and was promptly hit by the worst financial tsunami since the Great Depression.
His first weeks as CFO would have been challenging in normal times. FairPoint, a phone company based in Charlotte, N.C., this year took on a pile of debt to complete a $2.5 billion acquisition that essentially quintupled its size. Now the company needs to spend heavily to integrate the new phone systems, which it bought from Verizon Communications Inc.
[FairPoint Communications chief financial officer Alfred Giammarino working Wednesday with his finance team.] FairPoint Communications
FairPoint Communications chief financial officer Alfred Giammarino working Wednesday with his finance team.
With financial markets melting and FairPoint desperately needing to have cash on hand, Mr. Giammarino has had to shift funds repeatedly and fly around the country to reassure investors the company is on top of the problem.
Last week, he had 17 back-to-back meetings with investors at Scottsdale's Phoenician Resort, a posh enclave of marble fountains and sculpted hedges, which frequently hosts investor meetings. Afterward, he gave a presentation in a large conference room.
Dressed in a dark blue suit, Mr. Giammarino and his treasurer, Tom Griffin, gazed out over the subdued crowd. Among other things, he told them, FairPoint will spend $362 million this year to replace 600 outdated computer systems with 60 new ones. The underlying message: Although the financial crisis has shaken the markets, FairPoint is focused on running its operations.
"Right now, everyone just wants to know that you have the liquidity to do what you need to do," says the 52-year-old Brooklyn, N.Y., native.
Wall Street's turmoil has reached every corner of the economy, from the nation's ports to its factories and fast-food restaurants. It has prompted retirees to yank money out of money-market funds, parents to reconfigure college savings plans and consumers to scrounge for bargains. But among those experiencing the greatest pressure are the people in charge of securing money to keep corporate America afloat -- chief financial officers.
More on CFOs
Parker Hannifin's CFO hasn't had problems borrowing money. But the company's suppliers and distributors haven't been so fortunate.
The crisis has hit some CFOs harder than others. Companies laden with debt are viewed as bigger risks by their banks and face the most trouble securing loans. Those with low debt and the highest credit ratings are more insulated although they, too, face indirect fallout if their customers fail.
FairPoint, typical of many in the fast-moving and acquisitive telecom industry, completed its takeover of Verizon's phone networks in northern New England this year. The company, which had 600 employees at the start of this year, now has 3,400. It has five times as many customer lines.
The acquisition also added to FairPoint's debt, which totals about $2.4 billion in the form of bank borrowing and bonds. The company has a "junk" rating from credit-rating firms. It needs to draw on its credit lines for the cash needed to integrate Verizon's vast operations.
Some industry analysts and investors questioned the deal's wisdom, given the debt FairPoint took on and the shaky future of traditional wired phone lines.
FairPoint's stock has taken a beating, falling 12% the day the deal closed in March. It stood at $8.55 Wednesday in 4 p.m. New York Stock Exchange trading, down from a 52-week high of $19.48.
Mr. Giammarino's first day on the job was Sept. 2, just 13 days before Lehman Brothers Holdings Inc. collapsed into bankruptcy. Mr. Giammarino said he knew within days of joining FairPoint that he faced a potential crisis.
FairPoint has two credit lines, which held roughly $300 million in untapped funds at the time. Lehman Brothers was part of the banking syndicate behind the credit, accounting for about 30% of the available funds.
During the week before Lehman's bankruptcy filing, he noticed a spike in the pricing of Lehman's credit default swaps -- a credit instrument that reflects the confidence the market has in a company's ability to avoid default. "That told me the market was anticipating bankruptcy," he says.
He thought the situation would reach a climax over the weekend, so on Friday, Sept. 12, he pulled $200 million out of the credit lines, much to the dismay of the banking syndicate.
"The banks obviously didn't want us to draw the money; they wanted to keep the liquidity on their balance sheets. But we had no choice," he said.
Though the company didn't need the money at that moment, Mr. Giammarino knew FairPoint would require ready cash, including $50 million for new equipment needed to transfer Verizon customers to FairPoint. "It was an insurance policy, really," he says.
That weekend, Lehman was told it wouldn't get a government bailout, prompting it to file for bankruptcy protection early Monday.
That Sunday, Mr. Giammarino was at his home in northern Virginia, on the phone with the head of FairPoint's investor relations department, Brett Ellis. They worked on two press releases while a football game played on TV in the background. One described the $200 million drawdown of the credit lines and was released early Monday, to assure investors that FairPoint wasn't going to be slammed by the Lehman bankruptcy.
The other release went out after the stock markets closed Monday, with less assuring news. FairPoint said it wouldn't be able to complete the integration of the Verizon networks by November, as intended. Instead, the costly process was expected to be completed by January.
Once he decided to draw down the $200 million, he had to decide where to safely park it. He decided to divide it, equally, between a money market fund and a fund that invests in U.S. Treasuries. He figured both were safe.
But that confidence evaporated a few days later. While in New York for another series of investor meetings, he received a message from Mr. Griffin, the treasurer, telling him they needed to talk as soon as possible. When he reached Mr. Griffin, the treasurer told him that money market funds might be freezing up. He and Mr. Griffin agreed on the spot to shift the $100 million from the money market fund into the Treasury fund.
Mr. Giammarino, the son of a New York City Transit Authority laborer who became a union leader, has spent nearly 25 years in the telecom industry, including 15 years at the former GTE Corp. During that time he's seen plenty of turbulence, he said, including the bursting of the tech bubble. But he said he never imagined things could turn this bad, this fast.
"This is a period when you really can't take anything for granted," he said.
And he expects the challenges to grow as lenders fall by the wayside or merge. Trying to get new lenders at this moment is futile, he said: "Right now, we couldn't even open that conversation because banks aren't lending."
This week, he's visiting the former Verizon offices in Maine and New Hampshire to meet with local managers and get a close look at the work taking place to integrate the acquisition. He hasn't had time to move to Charlotte and commutes from northern Virginia each week.
Meanwhile, he's examining FairPoint's pension funds and insurance to determine whether the company is exposed to other risks. At this point, he isn't under pressure to delay payrolls or take other dramatic steps to conserve cash thanks to the money he drew from the credit lines.
But, he added, "With the economic situation worsening by the day, down the road we certainly will look at ways to reduce cost and expenses and manage the business a little more tightly. The economic downturn will certainly translate into less revenue."
Write to Timothy Aeppel at timothy.aeppel@wsj.com更多精彩文章及讨论，请光临枫下论坛 rolia.net
By TIMOTHY AEPPEL
SCOTTSDALE, Ariz. -- These are dark days for America's chief financial officers.
Alfred Giammarino took that post at FairPoint Communications Inc. a month ago and was promptly hit by the worst financial tsunami since the Great Depression.
His first weeks as CFO would have been challenging in normal times. FairPoint, a phone company based in Charlotte, N.C., this year took on a pile of debt to complete a $2.5 billion acquisition that essentially quintupled its size. Now the company needs to spend heavily to integrate the new phone systems, which it bought from Verizon Communications Inc.
[FairPoint Communications chief financial officer Alfred Giammarino working Wednesday with his finance team.] FairPoint Communications
FairPoint Communications chief financial officer Alfred Giammarino working Wednesday with his finance team.
With financial markets melting and FairPoint desperately needing to have cash on hand, Mr. Giammarino has had to shift funds repeatedly and fly around the country to reassure investors the company is on top of the problem.
Last week, he had 17 back-to-back meetings with investors at Scottsdale's Phoenician Resort, a posh enclave of marble fountains and sculpted hedges, which frequently hosts investor meetings. Afterward, he gave a presentation in a large conference room.
Dressed in a dark blue suit, Mr. Giammarino and his treasurer, Tom Griffin, gazed out over the subdued crowd. Among other things, he told them, FairPoint will spend $362 million this year to replace 600 outdated computer systems with 60 new ones. The underlying message: Although the financial crisis has shaken the markets, FairPoint is focused on running its operations.
"Right now, everyone just wants to know that you have the liquidity to do what you need to do," says the 52-year-old Brooklyn, N.Y., native.
Wall Street's turmoil has reached every corner of the economy, from the nation's ports to its factories and fast-food restaurants. It has prompted retirees to yank money out of money-market funds, parents to reconfigure college savings plans and consumers to scrounge for bargains. But among those experiencing the greatest pressure are the people in charge of securing money to keep corporate America afloat -- chief financial officers.
More on CFOs
Parker Hannifin's CFO hasn't had problems borrowing money. But the company's suppliers and distributors haven't been so fortunate.
The crisis has hit some CFOs harder than others. Companies laden with debt are viewed as bigger risks by their banks and face the most trouble securing loans. Those with low debt and the highest credit ratings are more insulated although they, too, face indirect fallout if their customers fail.
FairPoint, typical of many in the fast-moving and acquisitive telecom industry, completed its takeover of Verizon's phone networks in northern New England this year. The company, which had 600 employees at the start of this year, now has 3,400. It has five times as many customer lines.
The acquisition also added to FairPoint's debt, which totals about $2.4 billion in the form of bank borrowing and bonds. The company has a "junk" rating from credit-rating firms. It needs to draw on its credit lines for the cash needed to integrate Verizon's vast operations.
Some industry analysts and investors questioned the deal's wisdom, given the debt FairPoint took on and the shaky future of traditional wired phone lines.
FairPoint's stock has taken a beating, falling 12% the day the deal closed in March. It stood at $8.55 Wednesday in 4 p.m. New York Stock Exchange trading, down from a 52-week high of $19.48.
Mr. Giammarino's first day on the job was Sept. 2, just 13 days before Lehman Brothers Holdings Inc. collapsed into bankruptcy. Mr. Giammarino said he knew within days of joining FairPoint that he faced a potential crisis.
FairPoint has two credit lines, which held roughly $300 million in untapped funds at the time. Lehman Brothers was part of the banking syndicate behind the credit, accounting for about 30% of the available funds.
During the week before Lehman's bankruptcy filing, he noticed a spike in the pricing of Lehman's credit default swaps -- a credit instrument that reflects the confidence the market has in a company's ability to avoid default. "That told me the market was anticipating bankruptcy," he says.
He thought the situation would reach a climax over the weekend, so on Friday, Sept. 12, he pulled $200 million out of the credit lines, much to the dismay of the banking syndicate.
"The banks obviously didn't want us to draw the money; they wanted to keep the liquidity on their balance sheets. But we had no choice," he said.
Though the company didn't need the money at that moment, Mr. Giammarino knew FairPoint would require ready cash, including $50 million for new equipment needed to transfer Verizon customers to FairPoint. "It was an insurance policy, really," he says.
That weekend, Lehman was told it wouldn't get a government bailout, prompting it to file for bankruptcy protection early Monday.
That Sunday, Mr. Giammarino was at his home in northern Virginia, on the phone with the head of FairPoint's investor relations department, Brett Ellis. They worked on two press releases while a football game played on TV in the background. One described the $200 million drawdown of the credit lines and was released early Monday, to assure investors that FairPoint wasn't going to be slammed by the Lehman bankruptcy.
The other release went out after the stock markets closed Monday, with less assuring news. FairPoint said it wouldn't be able to complete the integration of the Verizon networks by November, as intended. Instead, the costly process was expected to be completed by January.
Once he decided to draw down the $200 million, he had to decide where to safely park it. He decided to divide it, equally, between a money market fund and a fund that invests in U.S. Treasuries. He figured both were safe.
But that confidence evaporated a few days later. While in New York for another series of investor meetings, he received a message from Mr. Griffin, the treasurer, telling him they needed to talk as soon as possible. When he reached Mr. Griffin, the treasurer told him that money market funds might be freezing up. He and Mr. Griffin agreed on the spot to shift the $100 million from the money market fund into the Treasury fund.
Mr. Giammarino, the son of a New York City Transit Authority laborer who became a union leader, has spent nearly 25 years in the telecom industry, including 15 years at the former GTE Corp. During that time he's seen plenty of turbulence, he said, including the bursting of the tech bubble. But he said he never imagined things could turn this bad, this fast.
"This is a period when you really can't take anything for granted," he said.
And he expects the challenges to grow as lenders fall by the wayside or merge. Trying to get new lenders at this moment is futile, he said: "Right now, we couldn't even open that conversation because banks aren't lending."
This week, he's visiting the former Verizon offices in Maine and New Hampshire to meet with local managers and get a close look at the work taking place to integrate the acquisition. He hasn't had time to move to Charlotte and commutes from northern Virginia each week.
Meanwhile, he's examining FairPoint's pension funds and insurance to determine whether the company is exposed to other risks. At this point, he isn't under pressure to delay payrolls or take other dramatic steps to conserve cash thanks to the money he drew from the credit lines.
But, he added, "With the economic situation worsening by the day, down the road we certainly will look at ways to reduce cost and expenses and manage the business a little more tightly. The economic downturn will certainly translate into less revenue."
Write to Timothy Aeppel at timothy.aeppel@wsj.com更多精彩文章及讨论，请光临枫下论坛 rolia.net