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Frontier Communications readies for Chapter 11

Chapter 11 Bankruptcy.jpeg

Frontier Communications (FC) has confirmed its intention to file for bankruptcy under the US’ Chapter 11.

In the company’s 2019 annual report it stated that the telco was in discussions with its shareholders about a possible restructuring. As part of this plan it confirmed the intention to file for a Chapter 11 of the US Bankruptcy Code.

The company plans on using the Chapter 11 to “generate sufficient liquidity from the restructuring to meet our obligations and operating needs”.

This was further supported by the company’s Securities and Exchange Commission filing, which cited declining legacy products particularly voice revenues, commercial/wholesale legacy data, and consumer legacy data.

Other causes included:

  • changing consumer behaviours and increased competition

  • high content and acquisition costs

  • and the company’s large fixed expense base

All these factors have resulted in an “over-leveraged capital structure” and “operational challenges” that prevent the company from investing in the maintenance and growth of its business amid “intense competition and general secular decline”.

If that weren’t enough, Frontier reported a number of headwinds that have only added to it weakened business position stating:

“Significant under-investment in fibre deployment and limited enterprise product offerings have created headwinds that the company is repositioning itself to reverse.”

But FC has a plan and intends to “transform from a provider of legacy telecoms services … to a next-generation broadband service provider with long-lived fibre-based telecoms infrastructure.”

It is going to invest in strategic products and networks including the upgrade of FTTx in its footprint, densify and edge out its network, and make next-gen fibre build outs for its wireless and wholesale customers.

Last month, the company entered into a 60-day grace period on Interest Payment due on some of its senior unsecured notes as it continues discussions with shareholders around its restricting plans.

“We remain actively engaged in constructive discussions with our bondholders as the company continues to evaluate its capital structure with an eye to reducing debt and interest expense,” Frontier said in a statement.

“As part of this process, Frontier has made the decision to take advantage of the 60-day grace period allowed under the indenture to facilitate ongoing discussions as we work to reach a comprehensive resolution.”

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