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Frontier Communications guides $1.15B of debtor-in-possession-to-exit notes

Frontier Communications Corporation has set price talk for a $1.15 billion offering of debtor-in-possession-to-exit senior secured notes at 6.00%-6.25%, sources said. Books for the seven-year (non-call three) paper will close today at 2 p.m. ET, with pricing expected to follow thereafter.

Goldman Sachs (left), J.P. Morgan, Deutsche Bank, Barclays, Morgan Stanley and Credit Suisse are bookrunners for the deal. Initial price thoughts circulated in a mid-6% context, according to sources."

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Frontier Communications provides communications services to consumer, commercial and wholesale customers in the United States. The company in April filed for Chapter 11 in bankruptcy court in the Southern District of New York.

Proceeds of the notes, together with those of a $500 million, seven-year DIP-to-exit term loan and cash on hand, will be used to refinance in full the issuer’s $1.65 billion of 8% first-lien senior secured notes due April 2027 and pay related interest, fees and expenses. J.P. Morgan is lead arranger for the loan portion of the financing.

Frontier Communications on Sept. 17 received authorization from the bankruptcy court overseeing its Chapter 11 proceedings to obtain the DIP-to-exit financing. Based on proposals it has received from prospective lenders, the company said, repaying its first-lien notes with the proceeds of DIP term loan/notes financing raised under current market conditions would save it $20 million in interest during the remainder of the Chapter 11 case and more than $35 million per year post-emergence, assuming the company exits Chapter 11 by March 2021. The proposed exit financing also includes a $625 million revolver.

The notes and loan have been assigned B+/B3/BB+ ratings, with stable outlooks at all three agencies. The bonds will be structured with a first call at par plus 50% of the coupon, sources said.

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