Goldman Sachs Bank, Deutsche Bank, Barclays Bank, Morgan Stanley Senior Funding and Credit Suisse provided a $460 million debtor-in-possession facility to Frontier Communications in conjunction with the company’s proposed financial restructuring, according to an 8K filed with the SEC.
In addition, Kirkland & Ellis is serving as legal advisor, Evercore is serving as financial advisor and FTI Consulting is serving as restructuring advisor to Frontier.
Frontier entered into a restructuring support agreement with bondholders representing more than 75% of its approximately $11 billion in outstanding unsecured bonds. The agreement contemplates agreed-upon terms for a pre-arranged financial restructuring plan that leaves unimpaired all general unsecured creditors and holders of secured and subsidiary debt. Under the agreement, the bondholders have, subject to certain terms and conditions, agreed to support implementation of a plan that is expected to reduce Frontier’s debt by more than $10 billion and provide financial flexibility to support continued investment in long-term growth. To implement the plan, Frontier and its direct and indirect subsidiaries voluntarily filed petitions under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of New York on April 14.
On April 16, Frontier received approvals on an interim basis from the U.S. Bankruptcy Court for the Southern District of New York for the “first day” motions related to the company’s voluntary Chapter 11 petitions. Among other things, the court authorized the company to continue paying employee wages and providing healthcare and other benefits, as well as to continue certain customer programs.
“We are pleased to have received approval of our first day motions, which will allow the business to continue operating, providing important services to our customers without interruption and maintaining our long-standing relationships with our vendors and business partners,” Robert Schriesheim, chairman of the finance committee of the board of directors for Frontier Communications, said. “Our comprehensive restructuring plan will result in a recapitalized balance sheet with a $10 billion reduction in our debt on an expedited basis, which will substantially enhance our financial flexibility and facilitate our ability to reposition Frontier and accelerate our broad-based strategic transformation. We appreciate the prompt action by the court in approving our first day motions.”
Based on its restructuring plan, Frontier’s liquidity will total more than $1.1 billion, comprising the DIP financing and the company’s more than $700 million cash on hand. This liquidity, combined with cash flow generated by the company’s ongoing operations, is expected to be available and sufficient to meet Frontier’s operational and restructuring needs. The DIP financing agreement provides for the additional financing to convert to a revolving exit facility upon emergence.
“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,” Schriesheim said. “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.”
Frontier expects to continue providing service to its customers without interruption and to work with its business partners as usual throughout the court-supervised process. Under the agreement, trade vendors will be unimpaired for both pre- and post-petition obligations.
“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,” Bernie Han, president and CEO of Frontier Communications, said. “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, and I would like to thank our team for their continued dedication, especially in light of the current environment.”
Frontier Communications offers services to residential and business customers over its fiber-optic and copper networks, including video, high-speed internet, advanced voice and Frontier Secure digital protection solutions.