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Frontier Communications talks pricing on $1.65B secured high yield offering

Frontier Communications (Nasdaq: FTR) has set talk for a $1.65 billion offering of eight-year (non-call three) first-lien secured notes in the 8% area, sources said. Books for the deal were set to close today.

Bookrunners for the deal are J.P. Morgan, Citi, Credit Suisse, Goldman Sachs, Morgan Stanley, Barclays, Bank of America Merrill Lynch, Deutsche Bank, and Mizuho. Initial price thoughts circulated at 8–8.25%, sources noted. These new notes will serve as the issuer’s inaugural first-lien, fixed-rate print.

Proceeds are earmarked to repay $1.4 billion and $239 million outstanding A term loan facilities due in 2021. Additionally, the borrower also intends to extend the maturity of at least $835 million of its $850 million revolving credit facility by two years, from 2022 to 2024.

Analysts at research firm CreditSights on March 12 noted that while the refinancing will “materially improve Frontier’s runway through 2021,” the company’s interest expense could increase by $30–40 million per year pro forma for this refinancing, and the issuer’s 7.125% senior notes due 2019, which CreditSights expects will be repaid using a mix of revolver borrowings and cash on hand.

Ratings have been assigned as B/B2, with a 1 recovery rating from S&P Global Ratings. Analysts at S&P Global Ratings view the transaction as leverage-neutral, but maintain a negative outlook at the borrower on expectations it “will be unable to address its longer-dated unsecured debt maturities when they come due absent favorable business, economic, and financial conditions because of its lack of secured debt capacity, low free operating cash flow, and elevated leverage,” a March 12 report noted. Moody’s has a stable outlook for the company.

Frontier Communications is a Norwalk, Conn.–based provider of communications services, offering data, video, and voice packages for residential and business customers. As of Dec. 31, 2018, total debt at the company was $17.2 billion, according to S&P Global Market Intelligence.

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