Insiders say telecom company may seek bankruptcy
EVERETT — Frontier Communications may seek bankruptcy protection in mid-March, reporters from Bloomberg have asserted from sources familiar with the situation.
The telecom company currently serves customers in 29 states and has about 18,000 employees.
It has an active deal to sell its Pacific Northwest operations in four states to WaveDivision Capital, a telecom-focused investment firm that is separate from Wave Broadband, a cable, phone and internet provider in the state. The former CEO of Wave Broadband founded the investment firm.
The Pacific Northwest selloff to WaveDivision would inject $1.3 billion into Frontier. The deal was announced last May and is still going through federal and state approval.
WaveDivision, the buyers, said in a news release at the time that the Frontier deal “does not change anything for Frontier’s customers or the employees who support them” and that “all contracts and rates will continue to be honored.”
Frontier is headquartered in Connecticut; its northwest division headquarters is in Everett.
Moving to bankruptcy may help Frontier stave off its current debt situation. If it chooses a Chapter 11 bankruptcy, it would allow it to continue service while reorganizing.
Last fall, Frontier drew its last $500 million worth of available revolver debt, according to a Jan. 18 report from investment-analysis firm CFRA Research. Maxing out a credit card could be similar to what the company did. It matures in 2024.
“We see this as a last act of desperation to keep the company out of bankruptcy for the next few months,” the CFRA analyst wrote.
In November, the company had $16 billion in overall debt on the books, from its third-quarter balance sheet data accessed through an investment brokerage. The company has $356 million worth of bond debt payments due this March, Bloomberg reported. CFRA’s analyst wrote the company has more than $7.3 billion worth of debt payments scheduled to be due over the next four years.
The company’s cash-on-hand was $733 million as of Nov. 30, according to its balance sheet. This was after taking the $500 million in credit debt.
A sizable part of Frontier’s overall debt picture appears to stem from Frontier’s deal to acquire Verizon’s landline and fiber-optic internet services in three states in 2016.
The Dallas Morning News reported in 2017 that Frontier sold $5.6 billion in bonds to help make the $10 billion purchase.
It came at a time when the cable segment of the telecom industry saw “cord-cutting” escalate. Meanwhile, Frontier’s stock fell, reducing its market capitalization value.
The Dallas paper quoted a report written by another investment analyst, this time from Morningstar, warning about bankruptcy risks. “Frontier faces a narrow path of recovery that leaves it little room for error, especially given its hefty debt load,” the Morningstar analyst wrote in May 2017.
