Item 1.01 Entry into a Material Definitive Agreement
Closing of Notes Offering
On November 25, 2020, Frontier Communications Corporation ("Frontier" or the
"Company") issued $1.55 billion aggregate principal amount of 5.000% First Lien
Secured Notes due 2028 (the "First Lien Notes") and $1.00 billion aggregate
principal amount of 6.750% Second Lien Secured Notes due 2029 (the "Second Lien
Notes" and, together with the First Lien Notes, the "Notes"). The First Lien
Notes were issued pursuant to an indenture, dated as of November 25, 2020 (the
"First Lien Indenture"), by and among Frontier, the guarantors party thereto,
the grantor party thereto, JPMorgan Chase Bank N.A., as collateral agent and
Wilmington Trust, National Association, a national banking association, as
trustee. The Second Lien Notes were issued pursuant to an indenture, dated as of
November 25, 2020 (the "Second Lien Indenture" and, together with the First Lien
Indenture, the "Indentures" and each an "Indenture"), by and among Frontier, the
guarantors party thereto, the grantor party thereto and Wilmington Trust,
National Association, as trustee and as collateral agent. The Notes were issued
in a private offering exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), to persons reasonably
believed to be qualified institutional buyers in accordance with Rule 144A under
the Securities Act and to persons outside the United States pursuant to
Regulation S under the Securities Act, at a purchase price equal to 100% of the
principal amount thereof.
Prior to the conversion date, the First Lien Notes are super-priority
obligations secured by a first-priority lien, subject to permitted liens, on a
super-priority basis by all the assets that secure Frontier's obligations under
its DIP Term Loan Facility (as defined below) and under its senior secured
super-priority debtor-in-possession revolving credit facility in an aggregate
principal amount of $625 million (the "DIP Revolving Facility"), pursuant to the
senior secured super-priority debtor-in-possession credit agreement, dated as of
October 8, 2020 (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the "DIP Revolver Credit Agreement"), by
and among Frontier, as the borrower, Goldman Sachs Bank USA, as administrative
agent and collateral agent and each lender and issuing bank from time to time
party thereto. From the conversion date, the First Lien Notes will be secured by
a first-priority lien, subject to permitted liens, by all the assets that secure
Frontier's obligations under its senior secured credit facilities and existing
first lien notes.
Prior to the conversion date, the Second Lien Notes are super-priority
obligations secured by a second-priority lien, subject to permitted liens, on a
super-priority basis by all the assets that secure Frontier's obligations under
its DIP Term Loan Facility and under its DIP Revolving Facility. From the
conversion date, the Second Lien Notes will be secured by a second-priority
lien, subject to permitted liens, by all the assets that secure Frontier's
obligations under its senior secured credit facilities and existing first lien
notes.
The First Lien Notes will bear interest at a rate of 5.000% per annum and will
mature on May 1, 2028. Interest on the First Lien Notes will be payable to
holders of record semi-annually in arrears on May 1 and November 1 of each year,
commencing May 1, 2021.
The Second Lien Notes will bear interest at a rate of 6.750% per annum and will
mature on May 1, 2029. Interest on the Second Lien Notes will be payable to
holders of record semi-annually in arrears on May 1 and November 1 of each year,
commencing May 1, 2021.
Frontier may redeem the Notes at any time, in whole or in part, prior to their
maturity. The redemption price for Notes redeemed before May 1, 2024 will be
equal to 100% of the aggregate principal amount of such series being redeemed,
together with any accrued and unpaid interest, if any, to, but not including,
the redemption date, plus the applicable make-whole premium. The redemption
price for First Lien Notes redeemed on or after May 1, 2024 will be equal to the
redemption prices set forth in the First Lien Indenture, together with any
accrued and unpaid interest to the redemption date, and the redemption price for
Second Lien Notes redeemed on or after May 1, 2024 will be equal to the
redemption prices set forth in the Second Lien Indenture, together with any
accrued and unpaid interest to the redemption date. At any time before November
1, 2023, Frontier may redeem up to 40% of the First Lien Notes using the
proceeds of certain equity offerings at a redemption price equal to 105.000% of
the aggregate principal amount thereof, together with any accrued and unpaid
interest, if any, to, but not including, the redemption date. At any time before
November 1, 2023, Frontier may redeem up to 40% of the Second Lien Notes using
the proceeds of certain equity offerings at a redemption price equal to 106.750%
of the aggregate principal amount thereof, together with any accrued and unpaid
interest, if any, to, but not including, the redemption date.
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In the event of a change of control triggering event, each holder of Notes will
have the right to require Frontier to purchase for cash such holder's Notes at a
purchase price equal to 101% of the principal amount of the applicable series of
Notes, plus accrued and unpaid interest, if any, to, but not including, the date
of repurchase.
The Indentures contain customary negative covenants, subject to a number of
important exceptions and qualifications, including, without limitation,
covenants related to incurring additional debt and issuing preferred stock;
incurring or creating liens; redeeming and/or prepaying certain debt; paying
dividends on stock or repurchasing stock; making certain investments; engaging
in specified sales of assets; entering into transactions with affiliates; and
engaging in consolidation, mergers and acquisitions. Certain of these covenants
will be suspended during such time, if any, that the First Lien Notes or the
Second Lien Notes, as applicable, have investment grade ratings by at least two
of Moody's, S&P or Fitch. The Indentures also provide for customary events of
default which, if any of them occurs, would permit or require the principal of
and accrued interest on the applicable series of Notes to become or to be
declared due and payable.
The Company used the proceeds from the offering of the Notes, together with the
proceeds of the Incremental Term Loan Facility (as defined below), if any, and
cash on hand, to (i) repay all outstanding borrowings under its prepetition term
loan B-1 facility due 2024, (ii) repay in full the Company's 8.500% Second Lien
Secured Notes due 2026 issued under that certain indenture, dated as of March
19, 2018, (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time), by and among the Company, as issuer, the guarantors
party thereto, the grantor party thereto, Wilmington Savings Fund Society, FSB
(as successor to the Bank of New York Mellon), as trustee and as collateral
agent and (iii) pay related interest, fees and expenses.
The foregoing descriptions of each of the First Lien Indenture and the Second
Lien Indenture are qualified in their entirety by reference to the full text of
such Indenture, copies of which are filed as Exhibits 4.1 and 4.2, respectively,
and are incorporated by reference herein.
Entry into Incremental Term Loan Facility
On November 25, 2020, the Company entered into an incremental amendment (the
"Incremental Term Loan Amendment") by and among Frontier, as the borrower, the
guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent and
collateral agent and each lender party thereto, which amends the credit
agreement, dated as of October 8, 2020 (the "DIP to Exit Term Credit
Agreement"). The Incremental Term Loan Amendment provides for an incremental
senior secured super-priority debtor-in-possession term loan facility in an
aggregate principal amount of $750 million (the "Incremental Term Loan Facility"
and, together with the existing senior secured super-priority
debtor-in-possession term loan facility with an aggregate principal amount of
$500 million, the "DIP Term Loan Facility").
The Incremental Term Loan Facility is secured by the same assets that secure the
term loans under the DIP to Exit Term Credit Agreement.
The Incremental Term Loan Facility will have a maturity of the earlier of (x)
the date that is twelve months after the original closing date of the DIP to
Exit Term Credit Agreement and (y) the date of the substantial consummation of
the Fifth Amended Plan of Reorganization of Frontier Communications Corporation
and Its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code, filed
August 21, 2020, and confirmed on August 27, 2020, together with any amendments,
supplements, or modifications thereto after the date hereof; provided that to
the extent such substantial consummation has not occurred on or prior to the
date referred to in the foregoing clause (x), primarily because any condition
precedent set forth therein with respect to the procurement of regulatory
approvals has not been satisfied (and other than any other conditions that by
their nature can only be satisfied on the consummation date), the maturity date
shall be extended by an additional six months; provided that if certain
conditions have occurred, the maturity date shall be the seventh anniversary of
the original closing date of the DIP to Exit Term Credit Agreement.
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is incorporated by reference into this
Item 2.03.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit
Number Description
4.1 Indenture, dated as of November 25, 2020, by and among Frontier
Communications Corporation, the guarantors party thereto, the
collateral grantor party thereto, JPMorgan Chase Bank N.A., as
collateral agent and Wilmington Trust, National Association, a
national banking association, as trustee, with respect to the 5.000%
First Lien Secured Notes due 2028.
4.2 Indenture, dated as of November 25, 2020, by and among Frontier
Communications Corporation, the guarantors party thereto, the
collateral grantor party thereto and Wilmington Trust, National
Association, a national banking association, as trustee and as
collateral agent, with respect to the 6.750% Second Lien Secured Notes
due 2029.
4.3 Form of 5.000% First Lien Secured Notes due 2028 (included in Exhibit
4.1 hereto).
4.4 Form of 6.750% Second Lien Secured Notes due 2029 (included in Exhibit
4.2 hereto).
10.1 Incremental Facility Amendment No. 1, dated as of November 25, 2020,
by and among Frontier Communications Corporation, the guarantors party
thereto, JPMorgan Chase Bank, N.A., as administrative agent and
collateral agent and each lender party thereto.
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