Frontier Communications filed for Chapter 11 bankruptcy late Tuesday evening and said it would continue to serve customers while restructuring. The move was expected due to the company’s high debt load of more than $17 billion, according to Bloomberg.
The company said it’s entered into a restructuring support agreement with bondholders representing more than 75 percent of Frontier’s $11 billion in outstanding unsecured bonds. The plan is expected to reduce the company’s debt by more than $10 billion and provide “significant financial flexibility” to support continued investment in Frontier’s long-term growth.
Frontier and its direct and indirect subsidiaries voluntarily filed petitions under Chapter 11 of the United States Bankruptcy Code in the Southern District of New York. “We are pleased that constructive engagement with our bondholders over many months has resulted in a comprehensive recapitalization and restructuring. We do not expect to experience any interruption in providing services to our customers,” said Robert Schriesheim, Chairman of the Finance Committee of the Board of Directors.
With a recapitalized balance sheet, the company will have the financial flexibility to reposition itself and allocate capital resources to enhance service offerings to customers while optimizing stakeholder value, according to Schriesheim. Under the plan, trade vendors will be paid for goods and services provided both before and after the filing date.
“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” said Frontier President/CEO Bernie Han in the announcement. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keeps them connected, safe and informed.”
In conjunction with the proposed financial restructuring, Frontier received commitments for $460 million in debtor-in-possession (DIP) financing. Following Court approval, the company’s liquidity will total over $1.1 billion comprising the DIP financing and Frontier’s more than $700 million cash on hand. This liquidity, combined with cash flow generated by Frontier’s ongoing operations, is expected to be available and sufficient to meet the company’s operational and restructuring needs. The DIP deal provides for additional financing to convert to a revolving exit facility once the company emerges from bankruptcy.
Frontier plans to proceed with the sale of its Washington, Oregon, Idaho, and Montana operations and assets to Northwest Fiber for $1.352 billion in cash, subject to certain closing adjustments, on or around April 30. It will seek Court approval to complete the transaction on an expedited basis.
In conjunction with the Chapter 11 filing, Frontier will file several motions with the Bankruptcy Court to allow the company to continue to operate without interruption or disruption to its relationships with its customers, vendors and employees. Frontier predicts the court will approve the requests.
In response to the Frontier announcement, FCC Wireline Competition Bureau Chief Kris Monteith said, “Staying connected to reliable telephone and internet services is essential in today’s America—perhaps never more so than during this unprecedented time as we confront the coronavirus pandemic. As such, I am pleased that Frontier has made clear that consumers will remain connected despite Frontier’s filing of a bankruptcy reorganization plan.”
Yet Monteith said the FCC will be watching. The agency expects Frontier to comply with all Commission regulatory obligations. “We will be vigilant in ensuring both that Frontier’s customers stay connected to vital 911, voice, and broadband services and that Frontier continues to put the federal funds it receives through the Connect America Fund and other universal service programs to work for the American people.”
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