As it continues talks with its bondholders regarding its capital structure, Frontier Communications announced on Monday that it would defer making the interest payments due on Monday on some of its senior unsecured notes. Instead, Frontier said it would enter a 60-day grace period.
"We remain actively engaged in constructive discussions with our bondholders as the company continues to evaluate its capital structure with an eye to reducing debt and interest expense," Frontier said in its Monday press release. "As part of this process, Frontier has made the decision to take advantage of the 60-day grace period allowed under the indenture to facilitate ongoing discussions as we work to reach a comprehensive resolution."
According to a story by Bloomberg, Frontier CEO Bernie Han, who replaced longtime CEO Dan McCarthy December, met with creditors and advisors in January. Han reportedly told them that Frontier wanted to negotiate a pre-packaged agreement before $365 million of debt payments become due on March 15.
Bloomberg has reported that Frontier is working with advisors and creditors to find solutions to address its $17.5 billion debt. A group of creditors, including Elliott Management and Franklin Resources, hold close to 50% of Frontier's bonds.
According to a Bloomberg story last week, Frontier is forgoing coupon payments that were due March 15 as it prepares to file for bankruptcy. Bloomberg, which cited unnamed sources, said that plan would include handing over control of the company to existing creditors. Bloomberg said that more than $320 million in debt payments were due on March 15.
While there have been reports that Frontier would file for bankruptcy this month, it has also been reported that it's now looking at doing so before April 15. Frontier has interest payments due April 1, which could also be subject to a 30-day grace period, and there are $172 million worth of notes maturing on April 15, but those don't have the 30-day grace period for maturing notes.
A spokesman for Frontier declined to provide any additional details on Frontier's decision to defer the interest payments that were due on March 16, and on whether it will indeed file for bankruptcy. During its past few earnings calls, Frontier hasn't done Q&As with analysts. Frontier hasn't scheduled its fourth quarter earnings call, which also could be an indicator that it plans to file for bankruptcy.
After closing at 34 cents a share, Frontier's shares were trading at 27 cents a share just after noon on Monday.
During its third quarter earnings report in November, Frontier racked up a net loss of $345 million, a loss of $3.31 per share, compared to a loss of $426 million ($4.11 per share) in the same quarter a year ago. In this year's second quarter, Frontier reported a $5.2 billion loss.
Frontier lost 1,000 fiber customers in the third quarter, which was a slightly lower loss from the previous quarter. While most of the major telecom operators are posting increased broadband subscribers on a steady drumbeat every quarter, Frontier lost 71,000 broadband subscribers in the quarter.
In addition to losing landline and broadband subscribers, Frontier's problems can be traced back to its deals with Verizon and AT&T. Five years ago, Frontier bought Verizon's wireline operations in California, Florida and Texas for $10.5 billion. In 2010, Frontier purchased Verizon's rural wireline assets in 14 states for $6.8 billion. Later, Frontier purchased AT&T's Connecticut wireline operations for $2 billion.
Frontier has been plagued by integration issues in the former AT&T and Verizon properties, and its customers have been vocal about their service issues.