Rural broadband and satellite TV provider Frontier Communications has priced its dual tranche US$1.55bn senior unsecured bond offering.
Frontier is issuing US$775m of 6.25% senior notes due 2021 and US$775m of 6.875% due 2025. Both priced at par.
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Rural broadband and satellite TV provider Frontier Communications has priced its dual tranche US$1.55bn senior unsecured bond offering.
Frontier is issuing US$775m of 6.25% senior notes due 2021 and US$775m of 6.875% due 2025. Both priced at par.
JP Morgan, Citigroup and Morgan Stanley are acting as joint bookrunning managers while Barclays, Credit Suisse, Deutsche Bank and RBS are co-managers.
Proceeds from the offering will be used to part-fund Frontier’s US$2bn January acquisition of AT&T’s fixed-line business in Connecticut.
The money is to be placed into an escrow account until Frontier closes the transaction. If the deal is terminated or otherwise not consummated by August 2015, Frontier will be obliged to redeem the notes at par plus accrued interest.
In June Frontier signed two new debt facilities totalling US$1.1bn, which will also help to part-finance the AT&T deal.
Moody’s has downgraded Frontier from Ba2 to Ba3 due to the increased leverage it has incurred from the debt raised to fund the acqusition. The ratings agency noted Frontier’s leverage will be more than 3.75x until at least 2017. It has previously said 3.75x was the upper limit to keep its Ba2 rating.
Moody’s said that the acquisition will improve Frontier’s scale by adding US$1.25bn of revenue for full-year earnings 2014, nearly 1.4 million additional households and about 1 million additional residential and commercial customers. The deal will also add an asset with high broadband penetration to Frontier’s coverage area.
However, the agency did not think the extra EBITDA and cost synergies generated from the acquisition would materially reduce Frontier’s leverage for the next few years.
Last week Connecticut’s utilities regulator rejected a settlement reached between local officials and Frontier to gain state approval of the transaction. The utilities regulator wants Frontier’s settlement to offer more benefits for state regulators.
The deal already has the approval of the Federal Communications Commission. Frontier still expects the acquisition to close before the end of the year.
Connecticut-based Frontier specialises in offering bundled triple-play services to both residential and business customers in rural areas. The company has around four million customers across 27 US states at present and provides satellite DTH services via Dish Network and DirecTV.
