Frontier Communications Inc., which provides phone and internet services to parts of Sylvania, northern Wood County, most of Ottawa County, and other parts of Ohio, has filed for Chapter 11 bankruptcy reorganization.
In its filing, the telecommunication company said it has a prearranged financial restructuring plan with a majority of its bondholders that will reduce the company’s debt by more than $10 billion “and provide significant financial flexibility to support continued investment in its long-term growth.”
Frontier, based in Norwalk, Conn., said that to implement the plan the company and its indirect subsidiaries had voluntarily filed Chapter 11 petitions on Tuesday in the U.S. Bankruptcy Court’s Southern District of New York, located in White Plains.
Among the 104 subsidiaries filing Chapter 11 are Frontier North Inc. and Frontier Communications of Michigan, Inc., which are incumbent local exchange carriers that cover Ohio.
Frontier is the No. 7 broadband provider by subscribers and the No. 4 incumbent phone service provider behind AT&T Inc., CenturyLink Inc., and Verizon Communications Inc.
The company said it has sufficient funds to meet its ongoing financial obligations and expects to continue providing service to all customers without interruption.
It added that it plans to work with its business partners throughout the court-supervised bankruptcy.
Frontier said that in addition to its restructuring plan, it has received commitments for $460 million in debtor-in-possession financing from Goldman Sachs Bank. Between that commitment and $700 million in available cash the company has on hand, Frontier said it will have over $1.1 billion in liquidity to meet its operational needs plus restructuring.
In addition, Frontier plans to sell its Washington, Oregon, Idaho, and Montana operations to Northwest Fiber for $1.35 billion in cash by April 30, pending court approval.
“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,” Robert Schriesheim, chairman of the finance committee of Frontier's board of directors,” said.
The restructuring plan calls for Frontier to swap $10 billion of its nearly $11 billion in unsecured bonds in exchange for 100 percent equity in the business. Unsecured bondholders also would receive $750 million in new debt and $150 million in cash.
Frontier said the plan is supported by 75 percent of its unsecured bondholders, though it must be approved by a judge and could be challenged by other creditors.
In its 37-page petition Frontier listed its estimated assets of $17.4 billion and liabilities of $21.8 billion. Creditors were listed as more than 100,000.
Among its stakeholders it listed private equity fund BlackRock Inc. with a 9.3 percent share, Vanguard Group with 5.8 percent, and Charles Schwab Investment Management at 5.7 percent.
Its top biggest unsecured creditors were Mellon Bank holding unsecured notes totaling over $10 billion and U.S. Bank at $1 billion.
Frontier had warned about its ability to continue as a going concern last month, and had been in discussions with some of its lenders. It also had been examining restructuring options.
The Wall Street Journal reported that the bankruptcy marks the end of an era during which Frontier Communications racked up roughly $17.5 billion in debt as part of an expansion campaign. As of the end of 2019 it had about 4 million customers, 3.5 million broadband subscribers and 18,300 employees operating in 29 states.
Frontier had expanded quickly over the past two decades by acquiring phone networks that other companies were eager to unload. Executives had later shifted their focus to newer fiber-optic networks that could wean the company off its aging copper phone lines.
But Frontier struggled to integrate new customers, especially those that it gained from a costly 2016 deal with Verizon that gave Frontier a wide base of superfast fiber-optic service in California, Florida, and Texas. Customers in those states complained of poor service, driving more business to cable providers that gained a bigger share of the broadband market at Frontier’s expense.
First Published April 17, 2020, 2:00 p.m.
