Frontier seeks to replace leverage test in credit facility

New York, Jan. 18 – Frontier Communications Corp. launched amendments to its credit agreements with JPMorgan Chase Bank, NA and CoBank ACB on Wednesday in order to replace the existing leverage ratio maintenance test in the credit agreements with a first lien net leverage ratio maintenance test, according to an 8-K filing with the Securities and Exchange Commission.

In a presentation to lenders, the company said it believes the modification will “remove the covenant overhang from the market” and better position it to address the upcoming maturities of its senior notes.

Lenders will still have “strong maintenance and incurrence covenant protection,” it added.

The amendment applies to Frontier’s revolver, $1.5 billion term loan A and $1.5 billion term loan B, according to the presentation.

The new terms will amend the total leverage maintenance covenant to a 1.5x first lien net leverage covenant with a stepdown to 1.35x on June 30, 2020. Currently the convent specifies a total net leverage ratio of 5.25x with stepdowns.

In addition, the lien incurrence covenant will be amended to limit pari passu first lien debt to $800 million but allow for junior liens. Currently the terms allow for 1.25x net secured incremental debt, which currently gives $1.7 billion of capacity at both the first lien and second lien levels.

Security for bank facility debt will be enhanced by pledges of some Connecticut and Pennsylvania subsidiaries in addition to the current security of the stock of some subsidiaries.

Consenting lenders will receive a fee of 15 basis points.

The deadline for the amendment is 5 p.m. ET on Jan. 19.

Similar changes will be requested for the CoBank facility.

Frontier has $578 million of bonds due in the fourth quarter, $428 million due in 2019 and less than $1 billion due in 2020.

The company called the near-term maturity profile “manageable.”

It has an $850 million revolver that is currently undrawn.

Frontier is a Norwalk, Conn.-based provider of communications services to urban, suburban and rural communities.

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