Frontier Plans to Skip Bond Payments in Runup to Bankruptcy

(Bloomberg) -- Frontier Communications Corp. will forgo coupon payments due March 15 as it prepares to file for bankruptcy with a plan that cuts its debt and hands control of the company to existing creditors, according to people with knowledge of the plans.

A Frontier bankruptcy would rank as one of the biggest telecom reorganizations since Worldcom Inc. in 2002. Frontier is holding discussions this week with prospective lenders to negotiate the terms of a so-called debtor-in-possession loan, which would provide the liquidity to support the company’s restructuring, said the people, who asked not to be identified discussing the private deal.

The telecom operator plans to file for bankruptcy after the coupon date although the situation is still somewhat fluid and subject to change, the people said. Skipping the bond payments will trigger a 30-day grace period.

Frontier shares plunged as much as 22% on the news and its 8.5% notes due April 2020 fell 6 cents on the dollar to 42.5 cents. Its 8% notes dues April 2027 rose 2 cents on the dollar to 102.25 cents, reflecting investor optimism that they could get paid in the long term.

A representative for Norwalk, Connecticut-based Frontier declined to comment.

Frontier has spent months in talks with advisers and creditors about possible solutions to addressing its $17.5 billion debt load, which has become a burden as customers move away from using land lines. The company relies heavily on copper and fiber-optic cabling to provide service.

Bernie Han, the company’s new chief executive officer, has been under pressure to act before March 15, when more than $320 million of debt payments are due. Frontier previously signaled it was pursuing a mid-March filing as talks between creditor groups picked up. Frontier is getting advice from lawyers at Kirkland & Ellis LLP and investment bankers at Evercore Inc.

A group of creditors including Elliott Management Corp. and Franklin Resources Inc. holding nearly 50% of the company’s bonds has organized with law firm Akin Gump Strauss Hauer & Feld LLP and investment bank Ducera Partners LLC, Bloomberg previously reported.

A separate group of creditors including GoldenTree Asset Management LP organized with Houlihan Lokey Inc. and Milbank LLP.

Frontier’s 11% senior unsecured notes due in September 2025 were trading around 40.5 cents on the dollar Tuesday, according to Trace bond trading data.

To contact the reporters on this story: Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net;Katherine Doherty in New York at kdoherty23@bloomberg.net;Allison McNeely in New York at amcneely@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Nicole Bullock, Boris Korby

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