Frontier, first-lien group like mediator proposal; noteholders counter

By Caroline Salls

Pittsburgh, Aug. 11 – Frontier Communications Corp. and a first-lien debtholder committee have agreed in principle to a mediator’s proposed settlement of outstanding disputes between the parties, but noteholder groups participating in the mediation rejected the mediator’s proposal and made a counter-offer, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

According to a mediation cleansing statement included as an exhibit to the 8-K, the mediator’s proposal included a cash payment by the Frontier debtors to their term loan lenders and first-lien noteholders of $57.5 million upon entry of the settlement order, with an additional $7.5 million payment from the debtors if Frontier does not emerge from Chapter 11 by March 31, 2021.

Also under the mediator’s proposal, the company’s second-lien lenders would forego their claims to default interest and agree to support the proposal in exchange for the first-lien committee agreeing not to pursue turnover claims against them in connection with an intercreditor agreement.

The agreement in principle remains subject to finalization and documentation.

Meanwhile, the noteholder groups’ counterproposal called for a $25 million consent fee payment to the term loan lenders and first-lien noteholders and full resolution of all first-lien reinstatement, make-whole, and non-pro rata paydown arguments/objections, including implementation via a debtor-in-possession facility to exit facility conversion.

Under the noteholders’ proposal, term lenders and first-lien noteholders will consent to treatment under Frontier’s Chapter 11 plan and confirmation of the plan, but will have the right to pursue default interest from the estates in the Chapter 11 cases.

In addition, the term lenders’ and first-lien noteholders’ rights to seek turnover from the second-lien lenders under the intercreditor agreement will be fully preserved under the noteholders’ proposal.

Frontier is a telecommunications company based in Norwalk, Conn. The company filed bankruptcy on April 14 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 11 case number 20-22476.

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