Frontier Announces Amendment to its Revolving Credit Facility

Rhea-AI Summary

Frontier Communications (NASDAQ: FYBR) has amended its revolving credit facility to increase the amount of new securitization debt the company can issue. The amendment requires a portion of the proceeds to refinance first lien debt, providing flexibility to fund its fiber build and refinance expensive debt. Frontier, the largest pure-play fiber internet provider, initially issued $2.1 billion in fiber securitization notes in August 2023. The new terms allow for additional securitizations alongside traditional financings, while protecting first lien holders. The cap on first lien debt, securitization, and other facilities has been raised from $2.5 billion to $5.5 billion. Protections for secured creditors include using 40% of securitization issuance to retire first lien debt for amounts between $2.1 billion and $4.0 billion, and 100% for amounts up to $5.5 billion. The facilities are to assets in Texas and Florida.

Positive

• Increased cap on first lien debt, securitization, and other facilities from $2.5 billion to $5.5 billion.
• Amendment provides flexibility to fund fiber build and refinance expensive debt.
• Allows use of securitizations alongside traditional financings, offering diverse investment options.
• 40% of securitization issuance to retire first lien debt for amounts between $2.1 billion and $4.0 billion, enhancing financial strategy.
• 100% of securitization issuance to retire first lien debt for amounts up to $5.5 billion, ensuring stronger financial health.

Negative

• Increased debt cap may indicate higher future debt levels, which could affect company leverage.
• The requirement to use securitization proceeds to retire first lien debt might limit the company's immediate liquidity options.
• Facilities to assets in Texas and Florida could restrict financial flexibility and scalability.

Insights

Financial Analyst

Frontier Communications' amendment to its revolving credit facility is a notable financial maneuver. The increase in the cap from $2.5 billion to $5.5 billion increases the company's leverage, which could be both a blessing and a curse. On the positive side, this gives Frontier flexibility in its financing options, especially using securitization backed by recurring cash flows from its fiber assets. This type of financing is generally seen as stable and lower risk, which could attract more conservative investors looking for steady returns.

However, the increased cap also implies higher potential debt levels. This comes with the risk of over-leveraging, which could strain the company’s balance sheet. Refinancing more expensive debt could reduce interest expenses in the short term, but the long-term financial health will depend on how effectively these funds are used for growth initiatives and whether the fiber build generates the expected returns.

Investors should watch the company’s debt ratios and interest coverage closely in upcoming quarters to see if the benefits of this facility amendment materialize as planned.

Rating: 0

Market Research Analyst

For Frontier, the use of securitization as a financing tool is particularly intriguing. Securitization can free up capital tied up in physical assets, allowing for reinvestment in high-growth areas like fiber optic infrastructure. Given that Frontier is the largest pure-play fiber internet provider in the country, this move could significantly impact its market share in key regions like Texas and Florida. The commitment to retire first lien debt with proceeds from securitization above certain thresholds might reassure existing creditors, thereby maintaining a balanced financial strategy.

From a market perspective, increased investment in fiber infrastructure could lead to higher market penetration, more customer acquisitions and ultimately, increased revenue. Yet, it’s essential to monitor competitive actions from other fiber and broadband providers, as well as regulatory changes that could impact the telecom sector.

Rating: 1

DALLAS--(BUSINESS WIRE)-- Frontier Communications Parent, Inc. (NASDAQ: FYBR) (“Frontier” or the “Company”) today announced the execution of an amendment to its revolving credit facility. The amendment increases the amount of new securitization debt the company may issue and requires that a portion of the proceeds be used to refinance first lien debt.

“This amendment allows us more flexibility to use securitizations to fund our fiber build and to refinance more expensive debt, while also providing important protections for our first lien debtholders,” said Scott Beasley, Chief Financial Officer of Frontier.

Frontier is the largest pure-play fiber internet provider in the country and issued its first fiber securitization notes in August 2023 as part of a $2.1 billion financing backed by fiber assets and associated customer contracts in the Dallas metropolitan area.

“Securitization is an attractive investment-grade financing tool that offers investors returns backed by the recurring cash flows of our fiber assets. This amendment will allow for additional securitizations alongside more traditional bank and bond financings, while working to ensure first lien holders are not disadvantaged,” added Beasley.

Under the terms of the amended revolving credit facility, Frontier increased its combined cap on certain first lien debt, securitization and receivables facilities, and non-loan party debt from $2.5 billion to $5.5 billion.

Additionally, the following protections were established for secured creditors:

• For securitization and receivables facilities in excess of approximately $2.1 billion and up to $4.0 billion, Frontier will use 40% of securitization issuance to retire first lien debt.
• For those in excess of $4.0 billion and up to the new $5.5 billion cap, Frontier will use 100% of securitization issuance to retire first lien debt.
• Securitization and receivable facilities are limited to Frontier’s assets in Texas and Florida, two of the company’s larger fiber markets.

About Frontier

Frontier (NASDAQ: FYBR) is the largest pure-play fiber provider in the U.S. Driven by our purpose, Building Gigabit America®, we deliver blazing-fast broadband connectivity that unlocks the potential of millions of consumers and businesses. For more information about Frontier, visit us at www.frontier.com. Investors can learn more at investor.frontier.com.

Forward-Looking Statements

This release contains “forward-looking statements” related to future events. Forward-looking statements address the Company’s expectations or beliefs concerning future events, including the Company’s financing plans, the position of existing debt holders, the Company’s continued fiber build, the Company’s future operating and financial performance, the credit rating of future debt, investor returns and other matters. These statements are made based on management’s views and assumptions as of the date of this release, regarding future events and performance. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. A wide range of factors could materially affect future developments and performance, including but not limited to: our significant indebtedness, our ability to incur substantially more debt in the future and covenants in the agreements governing our current indebtedness that may reduce our operating and financial flexibility; economic uncertainty, volatility in financial markets and rising interest rates could limit our ability to access capital or increase the cost of capital needed to fund business operations, including our fiber expansion plans; our ability to successfully implement strategic initiatives, including our fiber buildout and other initiatives to enhance revenue and realize productivity improvements; and certain other factors set forth in our other filings with the SEC. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. You should consider these important factors, as well as the risks and other factors contained in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent Annual Report on Form 10-K and subsequent SEC filings. The Company does not intend, nor does it undertake any duty, to update any forward-looking statements, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240523748585/en/

Investor Contact



Spencer Kurn

SVP, Investor Relations

+1 401-225-0475

spencer.kurn@ftr.com



Media Contact



Chrissy Murray

VP, Corporate Communications

+1 504-952-4225

chrissy.murray@ftr.com

Source: Frontier Communications Parent, Inc.

FAQ

What is the new cap on Frontier's first lien debt and securitization facilities after the amendment?

The new cap on Frontier's first lien debt and securitization facilities is $5.5 billion, up from the previous $2.5 billion.

How will the securitization proceeds be used according to Frontier's revolving credit facility amendment?

For facilities between $2.1 billion and $4.0 billion, 40% of securitization issuance will retire first lien debt. For facilities up to $5.5 billion, 100% will retire first lien debt.

What flexibility does the amendment to Frontier's revolving credit facility provide?

The amendment allows Frontier to use securitizations to fund its fiber build and refinance more expensive debt, providing greater financial flexibility.

Which assets are under Frontier's securitization and receivable facilities according to the new amendment?

The securitization and receivable facilities are to Frontier's assets in Texas and Florida.

Why does Frontier consider securitization an attractive financing tool?

Frontier considers securitization an attractive investment-grade financing tool as it offers investors returns backed by the recurring cash flows of their fiber assets.