Frontier Communications Corp.
is telling bondholders that it will shortly present a detailed plan to slash its roughly $17 billion debt load, according to people familiar with the matter. Frontier has signaled that it wants to start formal negotiations with a single group representing all bondholders, the people said. Many investors now expect the company to pursue a comprehensive debt restructuring, a decision that could put it on a path to a chapter 11 bankruptcy filing unless a fractious collection of bondholders can resolve their differences out of court.
Frontier declined to comment. Frontier’s outreach to creditors was earlier reported by Reorg Americas. Whether or not Frontier seeks bankruptcy protection, the company’s pursuit of debt restructuring highlights the problems facing an expansion strategy that took the company from a minor regional player to one that now provides phone and internet service throughout more than half the country. Starting roughly a decade ago, the company embarked on a series of acquisitions, each of which proved difficult to implement. Meanwhile, debt piled up. And the company struggled to hold on to customers in the face of stiff competition from providers of faster internet services. Unusually for a bankruptcy candidate, Frontier still generates free cash flow. It also doesn’t face significant debt maturities until 2022. Still, its business has been shrinking, and there is widespread agreement that it needs to ease its debt burden so it can invest in its infrastructure and have a shot at thriving. Some Frontier bondholders have been organized and angling for various debt-reduction plans for more than a year. Over time, two rival groups emerged. One, including Elliott Management and
pushed for an exchange of their bonds at a discount to their face value for new secured debt that would be paid before unsecured debt in a potential bankruptcy. Still, bondholders including GoldenTree Asset Management have warned the company against doing such a swap since 2018, arguing it violated the terms of their bonds. The company this week reached out to
which represents a group of bondholders that includes GoldenTree—as well as
JPMorgan Chase & Co.
Oaktree Capital Management and Brigade Capital Management—to sign up to view a confidential restructuring proposal, a person familiar with the matter said. That group has yet to gather enough holders to form a majority, people familiar with the matter said. Signs Frontier won’t pursue the debt-for-debt exchange strategy advocated by Elliott and others have led to sharp declines in the bonds that would have been targeted by the swap. An 11% note due in 2025 traded Friday at around 48 cents on the dollar, according to MarketAxess. That was down from nearly 54 cents Monday, when Frontier surprised some investors by making interest payments on the bonds. The upfront cost of credit-default swaps insuring $10 million of Frontier bonds against default for one year had climbed to around $4.4 million Thursday from $3.5 million Monday, according to IHS Markit. Frontier’s stock traded early Friday at 92 cents, down from $1.10 Tuesday and $2.40 at the end of last year. Write to Sam Goldfarb at firstname.lastname@example.org and Soma Biswas at email@example.com
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