Frontier Communications Corporation

About

“Frontier Communications Corporation provides communications services to residential and business customers in urban, suburban, and rural communities in the United States. The Company offers a variety of communications solutions services through its fiber-optic and copper networks, including video, high-speed internet, advanced voice, and frontier secure digital protection”.

Corporate Highlights

5/30/2019: The Company sells assets in 4 states to repay debt.

Frontier Communications Corporation (FTR) recently announced that it has inked a deal to sell its assets and operations in Washington, Oregon, Idaho and Montana to WaveDivision Capital, LLC and Searchlight Capital Partners, LLC. The transaction, valued at $1.352 billion in cash, is subject to regulatory approvals by the Federal Communications Commission, the U.S. Department of Justice, and the Committee on Foreign Investment in the United States.

The sale proceeds are likely to be utilized to pay off the company’s financial obligations, while strengthening its liquidity position. As of Mar 31, 2019, it had $119 million in cash and equivalents with $16,526 million of long-term debt. At the end of first-quarter 2019, Frontier Communications’ leverage ratio was 4.76:1.

BDC Credit Reporter View

6/13/2019:  Despite the Company’s best efforts to the contrary, Frontier Communications seems to be inexorably headed towards a Chapter 11 filing or a pre-agreed restructuring of its still heavy debt burden. The public shareholders seem to have thrown in the towel, judging by the stock price and there’s a whole bunch of debt coming due in the years ahead. Of the multiple BDCs involved in the $44mn of exposure, far and away the biggest lender is non-traded Business Development Corporation of America (BDCA), which has $24mn in two different senior loans and $15mn in subordinated notes according to Advantage Data. If Frontier does stumble – which seems as pre-ordained as a Greek tragedy – the subordinated debt seems most at risk of getting written off. Furthermore, BDCA is accruing most of the $3mn+ in annual investment income and will be strongly impacted if a default interrupts those interest payments. By contrast, the only public BDC with exposure is Oaktree’s OCSI (as well as one of its non-traded BDCs OCSI II) and the amount of debt and income at risk is very modest and non material. Nonetheless, should the Frontier debt turn out to be a dud for OCSI, there’ll be no one else to blame but itself. This loan was only added in IIIQ 2018, long after Oaktree took over from Fifth Street Management, who usually gets the (dis)credit for portfolio loans in trouble.