Frontier Communications Corp. (NASDAQ: FTR) has voluntarily filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in the Southern District of New York. The service provider says the move will enable it to implement a Restructuring Support Agreement (RSA) with bondholders who hold more than 75% of Frontier’s approximately $11 billion in outstanding unsecured bonds. If enacted successfully, the RSA will reduce the company’s debt by more than $10 billion and provide the financial resources to continue investments. Meanwhile, the company will continue to provide services to its customers.
As part of the restructuring negotiations, Frontier says it received commitments for $460 million in debtor-in-possession (DIP) financing. With the court’s approval of the plan, Frontier’s liquidity will stand at more than $1.1 billion, including the DIP financing and more than $700 million cash on hand. The agreed-upon financial restructuring plan will leave all general unsecured creditors and holders of secured and subsidiary debt unimpaired, asserts Frontier. Vendors likewise can expect payment for both pre- and post-petition product and services deliveries.
Meanwhile, the company will move ahead 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, 2020 (see “Frontier to sell northwestern operations to WaveDivision Capital” and “Ziply Fiber new name for former Frontier Communications northwest operations”). Frontier will seek court approval to close the transaction on an expedited basis.
“We are undertaking a proactive and strategic process with the support of our bondholders to reduce our debt by over $10 billion on an expedited basis. 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, we will have the financial flexibility to reposition the company and accelerate its transformation by allocating capital resources and adding talent to enhance our service offerings to our customers while optimizing value for our stakeholders. Under the RSA, our trade vendors will be paid for goods and services provided both before and after the filing date.”
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