Frontier Communications spins towards a mid-March bankruptcy filing—report

Embattled Frontier Communications is working with its creditors to file for bankruptcy by the middle of March as part of its efforts to right the ship.

According to a story by Bloomberg, Frontier CEO Bernie Han, who replaced longtime CEO Dan McCarthy last month, met with creditors and advisors on Thursday. 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 didn't name its sources for Thursday's meeting, but also reported that certain Frontier creditors signed confidentially documents that restrict their ability to trade in preparation for the negotiations. In a bankruptcy Chapter 11 proceeding, working with creditors would enable Frontier to keep operating without interruption of telephone and broadband service to its customers.

Frontier is saddled with a $17.5 billion debt load ahead of a possible restructuring. A group of creditors, including Elliott Management and Franklin Resources, hold close to 50% of Frontier's bonds.

"Frontier’s business and operations are solid and serving our customers remains our top priority. As we have said publicly, Frontier is evaluating its capital structure with an eye to reducing debt so as to be able to better serve our customers," said Frontier Communications' Javier Mendoza, vice president, corporate communications and external affairs, in an email to FierceTelecom Tuesday morning. "Our customers should expect no changes as we remain focused on providing connectivity services without interruption to our residential customers, institutions and businesses. We are proud to continue to offer well-paying jobs and benefits that contribute to the economic health of the communities we serve.”

In November Bloomberg reported that some of Frontier's creditors had hired telecom consulting firm Altman Vilandrie to conduct due diligence on Frontier, which includes developing a post-reorganization business plan. Those same sources said that Frontier could file for bankruptcy in the first quarter of this year ahead of the interest payment that's due in March.

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 was plagued by integration issues in the former AT&T and Verizon properties, and its customers have been vocal about service issues. 

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.

While Frontier cited a seasonality slowdown and the end of promotions as the causes for the broadband losses, the increase in consumer customer churn in the third quarter to 2.24% was up from 2.14% sequentially and 2.03% year-over-year.

RELATED: Frontier Communications narrows its loss in Q3 but revenue declines

Frontier executives said on the third quarter earnings call that the losses were primarily due to goodwill impairment charges of $276 million, as well as an additional $30 million loss on the previously announced sale of operations in Washington, Oregon, Idaho and Montana.