Moody’s cuts Frontier to B1, debt to Ba3

Moody's Investors Service said it downgraded the corporate family rating of Frontier Communications Corp. to B1 from Ba3 and changed the outlook to negative based on the company's persistently weak fundamentals.

The downgrade follows disappointing third quarter results, particularly within its recently acquired California, Texas and Florida (CTF) markets. The CTF markets experienced sharp subscriber losses for the second consecutive quarter and an 8% sequential decline in quarterly EBITDA.

Moody's also downgraded Frontier's probability of default rating to B1-PD from Ba3-PD, its unsecured rating to B1 from Ba3 and its secured rating to Ba3 from Ba2.

The speculative grade liquidity rating was downgraded to SGL-2 from SGL-1 reflecting potential pressure on its covenants from declining EBITDA.

Frontier's prior Ba3 rating was prospective and incorporated Moody's expectation of improved leverage and cash flow as the company achieved its planned merger synergies, the agency said. The prior rating was also predicated on Frontier reducing debt with excess cash flow.

These views have now changed and Moody's said it expects continued revenue, EBITDA and cash flow weakness.

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