Frontier Communications (NASDAQ:FTR) has issued US$6.6bn of senior unsecured notes to help fund its US$10.4bn acquisition of Verizon Communications’ wireline assets in California, Florida and Texas.
Frontier Communications (NASDAQ:FTR) has issued US$6.6bn of senior unsecured notes to help fund its US$10.4bn acquisition of Verizon Communications’ wireline assets in California, Florida and Texas.
The three-tranche private offering consists of US$1bn of 8.875% notes due 15 September 2020, US$2bn of 10.5% notes due 15 September 2022, and US$3.6bn of 11% notes due 15 September 2025, the US rural broadband and DTH provider said in an SEC filing. The Bank of New York Mellon acted as trustee.
Interest will be paid semi-annually in arrears on 15 March and 15 September each year from 2016.
The proceeds have been placed in escrow, with MUFG Union Bank as escrow agent, until the Verizon deal closes. If this does not occur by 6 August 2016, the notes will be redeemed at 100% of their principal amount plus interest.
Frontier has the option to redeem some or all of the 2020, 2022 and 2025 notes by the 15 June corresponding to each year.
The company, rated Ba3/BB-/BB, already has a bridge loan in place to cover the Verizon deal, which it expects to close by the end of March 2016, but has said it will not rely on this to close the transaction. As such, Frontier has inked a US$1.5bn senior secured five-year loan, with JP Morgan as lead-left bookrunner, and raised US$2.75bn in the equity market.
Separately, Frontier in June accepted some US$283m in annual support from the FCC’s Connect America Fund to boost its broadband roll-out.
Wells Fargo analyst Jennifer Fritzsche said in a recent investor note that Frontier is one of, if not the most, interesting companies on her coverage list right now.
“An 8.7% yield and a continued steady as she goes operational performance with the Connecticut assets [acquired from AT&T last year] should allow it to see additional upside potential in the equity – even in the face of rising interest rates,” she said.
Frontier, which has a market capitalisation of US$5.5bn, provides broadband, voice, video, wireless internet data access and data security solutions in 28 states.
