US-based rural broadband and satellite TV provider Frontier Communications is raising US$600m through the issuance of new senior unsecured notes, due 2023.
The offering, which was upsized by US$100m, priced at par to yield 7.125%. Credit Suisse and JP…
US-based rural broadband and satellite TV provider Frontier Communications is raising US$600m through the issuance of new senior unsecured notes, due 2023.
The offering, which was upsized by US$100m, priced at par to yield 7.125%. Credit Suisse and JP Morgan are joint book running managers on the sale with Barclays, Citigroup, Deutsche Bank, Morgan Stanley and RBS co-managers.
Frontier said that net proceeds would be used to repay existing debt, specifically the US$522.7m outstanding of 6.250% senior notes due mid-January 2013.
The transaction is part of Frontier’s wider refinancing strategy as seeks to push out the maturities on its circa-US$8.3bn of total debt, the majority of which is in the form of senior notes.
In May 2012, Frontier issued US$500m of 9-year senior unsecured notes which were used to fund the tender offer for its outstanding 8.25% senior notes due 2014 and 7.875% senior notes due 2015.
Prior to that, the company announced in February that it was reducing its dividend by 47% in order to focus on reducing leverage ratio. Frontier has a long-term leverage target of approximately 2.5 times gross debt-to-EBITDA compared to its current ratio, as of 30 June 2012, of 3.4 times. The dividend reduction is expected to save it US$348m on an annual basis.
According to ratings agency Fitch, which has assigned a BB+ rating to the new debt, Frontier has US$65m of principal payments due in 2012, US$581m in 2013and US$258m in 2014.
Fitch expects Frontier to repay this through a combination of new debt, free cash flow of between US$360m – US$400m and a portion of its untapped US$750m revolving credit facility.
Frontier specialises in offering bundled triple play services to both residential and business customers in rural areas. The company has approximately 4 million customers in 27 US states and provides satellite DTH services via Dish Network.
