RLPC-UPDATE 2-Fairpoint Communications widens loan discount

(Adds bond price talk)

NEW YORK, March 20 (Reuters) - Lehman Brothers is widening the discount on FairPoint Communications'(FRP.N: Quote, Profile, Research) $1.13 billion term loan to 88 cents on the dollar from 93 cents on the dollar, sources told Reuters Loan Pricing Corp. on Thursday.

In an earlier set of changes, a minimum 3 percent floor for the London international bank rate was added to the term loan in order to guarantee a minimum return amid a decline in the three-month U.S. dollar Libor rate.

Assuming a four-year life and the 3 percent Libor floor, the all-in yield on the term loan would be 9.16 percent. The spread on the seven-year term loan remains 275 bps over Libor.

In addition to the Libor floor, lenders will be protected from any opportunistic refinancing of the loan if the company's ownership changes hands. A change of control that is invoked to refinance debt in case of a buyout will now require the consent of 95 percent of the lenders instead of the more traditional 50 percent.

The term loan is part of FairPoint's $2.03 billion bank loan backing its merger with Northern New England Spinco Inc., a unit of Verizon Communications(VZ.N: Quote, Profile, Research).

The rest of the bank loan consists of a $200 million six-year revolver, a $500 million six-year term loan A, and a $200 million, seven-year delayed-draw term loan.

The corporate family rating is "B1/BB," while the facility rating is "Ba3/BB-plus."

FairPoint is also raising $540 million in 10-year senior unsecured notes, expected to be priced next week. Issued by Northern New England Spinco, the notes are expected to yield about 11.5 percent. Bank of America is leading that deal with Lehman Brothers and Morgan Stanley.