S&P downgrades Frontier, rates new revolver BB

S&P said it lowered the corporate credit rating and senior unsecured debt rating to B+ from BB- on Frontier Communications Corp.

The agency also said it assigned a BB rating and 1 recovery rating to the company's new $850 million senior secured revolving credit facility due in 2022.

The 1 recovery rating indicates 90% to 100% expected default recovery.

The new revolver replaces the company's existing $750 million revolver that was scheduled to mature in 2018, S&P noted.

The agency also said it affirmed the rating on the Frontier's existing secured debt at BB and revised the recovery rating to 1 from 2.

The outlook is stable.

The new revolver, along with Frontier's existing secured debt, will be secured by a pledge of stock of subsidiaries that represent about 60% of consolidated EBITDA, S&P said.

Previously, the secured debt was only granted a pledge of stock in Frontier North, which accounted for about 15% of total EBITDA, the agency said.

As a result, S&P said it revised the recovery rating on this debt to 1 from 2 and affirmed the rating.

The agency also said it lowered the ratings to BB from BB+ on Frontier North's $200 million of 6.73% debentures due in 2028; Frontier West Virginia's $50 million of 8.40% debentures due in 2029; Verizon California's $200 million of 6¾% debentures due in 2027; Verizon Florida's $300 million of 6.86% debentures due in 2028; and GTE Southwest's $100 million of 8½% first mortgage bonds due in 2031.

The recovery rating on this debt is unchanged at 1.

All of the ratings were removed from CreditWatch, where they were placed with negative implications in November 2016, S&P added.

The downgrades reflect a view that Frontier will be challenged to meaningfully improve operating and financial performance in 2017 following disappointing results in 2016 due to declining revenue from the acquired properties from Verizon, which closed in the first quarter of 2016, the agency explained.

The lower revenue was the result of higher customer churn due to confusion in customer billing and service disruptions, S&P said, as well as lower gross subscriber additions.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.