Item 1.01
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Entry into a Material Definitive Agreement.
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Closing of Notes Offering
On March 19, 2018, Frontier Communications Corporation (
Frontier
or the
Company
) issued
$1.6 billion aggregate principal amount of 8.500% Second Lien Secured Notes due 2026 (the
Second Lien Notes
). The Second Lien Notes were issued pursuant to an indenture, dated as of March 19, 2018, by and among
Frontier, the guarantors party thereto and The Bank of New York Mellon, as trustee and collateral agent (the
Second Lien Notes Indenture
). The Second Lien 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.
The Second Lien
Notes are guaranteed by each of the Companys subsidiaries that guarantees its senior secured credit facilities. The guarantees are unsecured obligations of the guarantors and subordinated in right of payment to all of the guarantors
obligations under the Companys senior secured credit facilities and certain other permitted future senior indebtedness but equal in right of payment with all other unsubordinated obligations of the guarantors. The Second Lien Notes Indenture
provides that (a) the aggregate amount of all guaranteed obligations guaranteed by the guarantees are limited and shall not, at any time, exceed the lesser of (x) the principal amount of the Second Lien Notes then outstanding and (y) the Maximum
Guarantee Amount (as defined in the Second Lien Notes Indenture), and (b) for the avoidance of doubt, nothing in the Indenture shall, on any date or from time to time, allow the aggregate amount of all such guaranteed obligations guaranteed by the
guarantors to cause or result in the Company or any subsidiary violating any indenture governing the Companys existing senior notes.
The Second
Lien Notes are secured on a second-priority basis by all the assets that secure Frontiers obligations under its senior secured credit facilities on a first-priority basis. The collateral securing the Second Lien Notes and the Companys
senior secured credit facilities is limited to the equity interests of certain subsidiaries of the Company and substantially all personal property of Newco West Holdings LLC.
The Second Lien Notes will bear interest at a rate of 8.500% per annum and will mature on April 1, 2026. Interest on the Second Lien Notes will be
payable to holders of record semi-annually in arrears on April 1 and October 1 of each year, commencing October 1, 2018.
Frontier may
redeem the Second Lien Notes at any time, in whole or in part, prior to their maturity. The redemption price for Second Lien Notes redeemed before April 1, 2021 will be equal to 100% of the principal amount thereof, together with any accrued
and unpaid interest to the redemption date, plus a make-whole premium. The redemption price for Second Lien Notes redeemed on or after April 1, 2021 will be equal to the redemption prices set forth in the Second Lien Notes Indenture, together
with any accrued and unpaid interest to the redemption date. In addition, at any time before April 1, 2021, Frontier may redeem up to 40% of the Second Lien Notes using the proceeds of certain equity offerings.
In the event of a change of control triggering event, each holder of Second Lien Notes will have the right to require Frontier to purchase for cash such
holders Second Lien Notes at a purchase price equal to 101% of the principal amount of the Second Lien Notes, plus accrued and unpaid interest.
The
Second Lien Notes Indenture contains customary negative covenants, subject to a number of important exceptions and qualifications, including, without limitation, covenants related to indebtedness, disqualified stock and preferred stock; dividends
and distributions to stockholders and parent entities; repurchase and redemption of capital stock; investments and acquisitions; transactions with affiliates; liens; mergers, consolidations and transfers of substantially all assets; transfer or sale
of assets, including capital stock of subsidiaries; and prepayment, redemption or repurchase of indebtedness subordinated to the Second Lien Notes. Certain of these covenants will be suspended during such time, if any, that the Second Lien Notes
have investment grade ratings by at least two of Moodys, S&P or Fitch.
The Second Lien Notes Indenture also provides for customary events of
default which, if any of them occurs, would permit or require the principal of and accrued interest on the Second Lien Notes to become or to be declared due and payable.
Supplemental Indenture
On March 19, 2018,
Frontier received, pursuant to its previously announced cash tender offer and related consent solicitation for any and all of its outstanding 8.875% Senior Notes due 2020 (the
8.875% Notes
), the requisite consents to adopt
the proposed amendments to the indenture governing the 8.875% Notes (the
8.875% Notes Indenture
). In connection therewith, Frontier and The Bank of New York Mellon, as trustee, entered into a Fourth Supplemental Indenture,
dated as of March 20, 2018 (the
Supplemental Indenture
), to the 8.875% Notes Indenture. The Supplemental Indenture gives effect to the proposed amendments, which eliminated substantially all restrictive covenants,
certain events of default and certain other provisions contained in the 8.875% Notes Indenture. The amendments to the 8.875% Notes Indenture became operative upon Frontiers purchase of a majority in principal amount of the outstanding 8.875%
Notes on March 20, 2018.
The tender offer and consent solicitation are being made upon the terms and conditions set forth in an Offer to
Purchase and Consent Solicitation Statement, dated March 6, 2018, and the related Letter of Transmittal.
The foregoing descriptions of the Second
Lien Notes Indenture and the Supplemental Indenture are qualified in their entirety by reference to the full text of the Second Lien Notes Indenture and Supplemental Indenture, copies of which are filed with this report as Exhibits 4.1 and 4.3,
respectively, and are incorporated by reference herein.