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Frontier Communications: Beware Of The Ides Of March

Paolo Gorgo profile picture
Paolo Gorgo


  • Frontier Communications has been signaling its intention to file for Chapter 11 ahead of its March 15th interest payments, according to Bloomberg.
  • While the company told creditors it preferred to deal with a single group, there are at least four counterparts fighting at the negotiating table.
  • Like in sophisticated four-player chess game, groups may team to pursue common interests, but their final targets will most likely diverge.
  • A Chapter 11 filing may emerge as the only way out of this complex situation limiting litigation risks.
  • Frontier’s 8.5% 4/15/2020 bonds may be the proverbial canary in the coal mine. Their current price is telling us that an imminent Chapter 11 filing is very likely.

A four-player chess game

Back in June 2019, hedge fund Aurelius wrote a letter to Frontier Communications (FTR) to pursue an out-of-court debt exchange.

On October 2019 Robert Citrone recommended the company file for Chapter 11 “sooner than later”.

In November 2019 a different group of creditors holding Frontier’s debt hired a law firm to ensure their interests were represented in the troubled telecom company’s restructuring negotiations.

Just in case three different creditor groups, all of them pursuing different targets, are not enough to confuse investors about the possible outcome for the company, Frontier’s largest union recently entered the scene, too.

According to comments made in February 2020, the union expects FTR to adopt a restructuring plan that converts about 80% of the company’s $12 billion of unsecured debt should into equity - inside information or wishful thinking?

four-player chess game - Frontier restructuring

Image from Wikipedia

In such a complex situation (understatement for complete mess), we are not surprised that Frontier Communications has been signaling its intention to file for Chapter 11 ahead of its large March 15th interest payments, as reported by Bloomberg.

A court supervised process may be the best way, or the only option left to the company, to deal properly with a restructuring, that involves some of the most litigious counterparts.

Debt and equity investors in Frontier communication may have to wait no longer than the ides of March to know the outcome for their investment.

The Ides of March was a day in the Roman calendar that corresponds to March 15th.

If you have ever heard of it, it's probably thanks to William Shakespeare - it was on that day that Caesar was killed.

However, it was notable for the Romans as a deadline for settling debts - a perfect description for FTR restructuring efforts.

The proverbial canary in the

This article was written by

Paolo Gorgo profile picture
Paolo Gorgo' founded Nortia Research to pursue his passion for equity research. Paolo is an Italy-based investor who mostly analyzes distressed debt and turnaround cases. On Seeking Alpha, he started covering the Telecommunications Infrastructure and Colocation Industry, whose turnaround has been impressive - see his article: "Equinix's Journey From IPO To The Nasdaq 100 Through Near Bankruptcy". Paolo's commentary has been quoted both by news organizations like Reuters and listed companies like Equinix, Switch and Data, TelX (Digital Realty), etc. He can be reached at: admin [at] nortiaresearch [dot] com

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (134)


Nab, where are you Nab?
Paolo Gorgo profile picture
FTR is now disclosing certain confidential information regarding the potential restructuring, that had been shared under NDA with some noteholders (the “NDA Parties”).


A key document is slide 33:

$10.9 billion of senior notes to become equity in the company and $1,1 billion cash.

Current equity holders to be determined if/what percentage of the new company they get.
Thanks for posting, I missed it.

Looks like no need for punitive DIP - in fact, kicking out cash to bondholders - about 10% of par in cash, rest in stock.

Current stock may get a cut - that's part of negotiations. And, obviously, negotiations for management's cut...

Much more realistic projections than company ever shares - see how far down EBITDA and cash-flow go in the next 4 years?
If I read it right, all 3 proposals on the table (Co, 2 b/h groups) put it clearly: current equity interest = no recovery.
At least the two by creditor proposals. I forget on the company proposal. Elsewhere in the docs (there are a lot of docs) it mentions TBD for split between unsecured & existing equity.

All, of course, subject to change. It may be they are advised to give equity a couple percent to get it through.
Lance Brofman profile picture
Is there any significant aspect of the FTR loss of customers, that could be mitigated by the COVID19 pandemic? An example could be that people might not want to now switch from FTR to another provider, if that involved having installers come into their homes, or that installation of new equipment just because someone wants to switch providers, is not considered essential activity, and thus not permitted due to the COVID19 pandemic?

Anyone know?

my company is compensating some employees for upgrading home speeds but that would be a drop in the bucket.
James19 profile picture
..We will prosecute BOD for criminal offences. As long as FTR announces bankruptcy, our lawyers guarantee that BOD will go to jail with federal felony.
Lance Brofman profile picture
Yes, there are numerous entities that profit greatly from a bankruptcy like this. And they do provide many inducements to the management to file for bankruptcy sooner than they really have to or even when they might not do so at all. (Luxury box seats at the super bowl anyone?).

However, the final decision is made by the management. A paradox is that the absolutely best CEO to have in a distressed situation like this, is a raving paranoid, who screams on conference calls that those short-sellers who are conspiring against his company will never win and he will never file for bankruptcy.

If you can find a distressed company with a somewhat deranged CEO like this, it is usually a good move to buy securities in such a company. The CEO of CLF loudly railed against short-sellers and vowed that CLF would survive and the securities did very well.
James19 profile picture
...As long as FTR announces bankruptcy, we will immediately sue BOD.
Bondsmoker, I never understood why you were so negative on the bonds since like me you own them. You seemed to be on the compananys side saying they should not pay interest etc etc. But I am writing to congradulate you for being right all along!. You should have taken the 1 million bet with Nab Investments not that you would really ever collect.
Where do you take the certainty it's over??? Do yourself the favor and read the full 8-K text.
@Paolo Gorgo @Quantum Coins @Lance Brofman @muslemilk The skeptics were correct: Interest payment on 6.25% 9/15/21's will be sucked back.
Quantum Coins profile picture
Yep. Thanks.

At this point, looks like I got this one wrong.

Recovery could still be ok, but that wasn't my thesis.
Paolo Gorgo profile picture

Frontier Communications to Enter 60-Day Grace Period on Interest Payment

Continuing Constructive Discussions with Bondholders

Serving Customers Without Interruption and Working with Business Partners as Usual
@Paolo Gorgo FWIW my brokerage account shows today that 3/15/20 interest on 6.25% 9/15/21 has been paid.
Great news!
Yes, great news IF IF IF the money stays in my account....
Well, its Sunday - so what are the chances an actual cash transfer took place today from one bank to another?
Can someone with their vast knowledge clarify the following:?
If the company was thinking of filing for C11, as the rumors over seem to be professing, why in hell did the company draw a further £300M on the revolver when they had ample cash in hand during in the Qtr ending 09/19.
It does not make sense that they would have to pay interest on this $300M when there was no need to increase the cash in hand. In fact in the last Qtr they would have generated at least $250- 300M
Companies draw down their revolvers when they expect to file Ch-11.

Once they file, they are cut-off from access, so draw prior to have cash on hand.

Kind of like - why go shopping for food & supplies, when you are expecting to be holed up in your house for a month while a pandemic passes by?
Paolo Gorgo profile picture
It also costs less than a DIP (debtor in possession) financing, which is usually quite expensive and super-priority.
I’m curious why the need to negotiate DIP in the first place. Won’t they have $1B plus in cash on the books? They had $700m plus on 9/30 and gain $300m in Q4. Without the bond interest payments they should have $1.2B plus at the end of Q1.  

Personally I’m hoping for a quick in and out of Ch11. All of the cash on the books makes me think the sure to come immediate lawsuits from current equity have merit and will drag this out.

13 Mar. 2020
Maybe it's a good news for FTR, if people should stay home because of WUHAN virus.That means more TV, more games, more fibers.
The days of customers paying by the MB are long over.

Landlines still in terminal decline. Competition still stiff.
Frontier CH-11 may not happen in March - but only because bankruptcy lawyers too busy processing paper-work for all the shale E&P firms....

Well something is happening, all of the Frontier and Citizens bonds have disappeared from Fidelity. I know it is not the place to buy bonds, they did have a fair selection to choose from. Now they are all gone except for 1 (which I don't remember 2025 I think) at $104 more or less. I was buying the '25 11% bonds at 40-1 just for grins now can't even play that game. I probably have enough to replace the common I will loose anyway.
The April-2020 bonds trading at 30% of par (down from 50's recently).

Ch-11 filing is basically certain. Filing itself will take a bit. They are liable to just announce 30 day deferral on bond interest, then file at the end.

I jest - but BK lawyers & courts are screaming busy right now...
BS, they had enough time to do this, no excuses
Seems the fake news to be all truth since the stock plummets with a single Bloomberg article.........
Bloomberg has been posting FTR BK news since last June. On March 16, we can know whether this series of news is true or not?
Take advantage of fake news, short Interest plummets!
James19 profile picture
As soon as FTR pays the interest of March 15, we will immediately sue Bloomberg.
What you should be doing is buying up the stock while it's this low. Instead of wasting time here. If you're right you'll be a billionaire... ^eyeroll...
FTR Creditiors, What makes you think the 3/15 interest will be paid? Even if it is do you think FTR will file bankruptvy before 4/15 bonds come due?.
Paying is doubtful. Why bother? Either the unsecured holders deal or they will get largely wiped out. Another 30 day clock on top of delisting.
Of course...was there ever any doubts which way this was going?
Well, yeah, read all the posters who insisted a Ch-11 wouldn't happen, plenty of cash, yada yada.

Of course, won't hear from them now. Always the same.
Well frankly you're wrong: it was you and the likes posting up in some situations (like this one) and being totally mute in others, and the other group doing same in opposite situations... Obviously it is the character of this type of chatrooms...
No, I've been consistent in my posts. Just look at the financials-too much debt and too much in intangibles, so no real assets to cover that level debt. No creditor wants to take a haircut and leave a lower level with anything.
Paolo Gorgo profile picture
Frontier Plans to Skip Bond Payments in Runup to Bankruptcy


Frontier Communications Corp. will forgo coupon payments due March 15 as it prepares to file for bankruptcy with a plan that cuts its debt and hands control of the company to existing creditors, according to people with knowledge of the plans.

The telecom operator plans to file for bankruptcy after the coupon date although the situation is still somewhat fluid and subject to change, the people said. Skipping the bond payments will trigger a 30-day grace period.
Throwing in the towel or more leverage with unsecured bond holders?
Lance Brofman profile picture
Throwing in the towel
marcopelo profile picture

Fun to see that Frontier might be filing BK just while being Official TV and Internet Provider for 2020 Firestone Grand Prix (13-15th of March)

Well, maybe on 16th...

Today is probably not the best day to comment, but 04/15/2020 bond is going well below 50.

Let's see, I do not see news till now.
Peterjean profile picture
March 2 should be the date of original financial report . But FTR has not announced until now. FTR also did not explain reason . The new CEO did not sign any financial statements. This avoids unnecessary litigation during bankruptcy.It is quite possible to enter Chapter 11 these days.
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