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Not long ago we wrote that the Verizon’s (NYSE:VZ) spinoff of its directory business (Idearc Inc. (IAR)) seemed to be fortuitously timed to get $9 billion of debt off of the company’s balance sheet just before new accounting rules require them to recognize $20 billion of previously off-balance sheet benefits owed to retirees. Now the company is taking care of another slug of debt.

Verizon to spin off local-phone assets; FairPoint shares rally

Verizon investors would receive one share of FairPoint (NASDAQ:FRP) for each 55 shares of Verizon that they own. The deal would be worth about $1 billion to Verizon investors based on FairPoint’s Friday closing price of $18.54. Verizon stockholders would own 60% of the company.

In addition, the spun-off phone assets would be assigned $1.7 billion in Verizon debt.

In Maine, Vermont and New Hampshire, Verizon serviced about 1.5 million local access lines as of last September.

At $1,800 per access line, the deal appears to be in line with recent transactions, and serves to take another slug of debt off Verizon’s balance sheet without incurring taxes for shareholders. However, small shareholders could come out of the deal with a handful of FairPoint shares worth little more than the commissions that would be incurred in selling them.

FRP 1-yr chart:

FRP 1-yr chart

Source: Verizon FairPoint Spinoff To Lower Debt - What Do Shareholders Have To Gain?