joseph d. chicoine
TRANSCRIPT
August 3020 19
JOSEPH D CHICOINE Sr Manager Regulatory Affairs
Frontier Communications 9260 E Stockton Blvd
Elk Grove CA 95624
Joechicoineftrcom (916) 686-3588
Connie Graley Executive Secretary Public Service Commission of West Virginia 201 Brooks Street Charleston West Virginia 25323
Re Frontier Communications Corporation et al Case No 09-0871-T-PC
In accordance with Condition 25 of the Commissionrsquos Order of May 132012 in the above- styled and numbered case Frontier West Virginia Inc is hereby filing the attached update from Fitch Ratings and Moodyrsquos Investor Service
If you have any questions please do not hesitate to contact me
s
Joseph D Chicoine df
Enclosure
cc Angie McCall Frontier Parties of Record
t
New fork August 12 2019 -- Moodys Investors Service (Moodys) h a s downgraded the corporate family rating (CFR) of Frontier Communications Corporation (Frontier) to Caa2 from Caal and the probability of default rating (PDR) to Caa3-PD from Caal-PD Moodys h a s also downgraded the companys first lien secured term loan B and first lien secured notes to 83 from 82 and affirmed the second lien secured notes a t B3 Moodys downgraded the unsecured notes to Caa3 from Caa2 and affirmed the speculative grade liquidity rating a t SGL-3 The rating outlook is negative
The downgrade of the CFR reflects a n updated assessment of the companys probability of default and recovery expectations following weak second quarter 201 9 revenue and EBITDA results continued negative net customer addition trends and reduced expectations regarding cost efficiency programs going forward Frontiers decision to write down $545 billion of goodwill in the quarter reflected in part concerns regarding the long term sustainability of the companys capital structure and reduced expectations for the overall wireline industry The companys potential to improve weak fundamentals in advance of sizable debt maturities beginning in 2022 remains difficult given a shortening runway to stabilize business trends The potential for distressed debt exchanges in the next year or so is further elevated based on these operating results and other developments including recent appointments of new Board members with restructuring and bankruptcy experience Moodys continues to anticipate a heightened focus on potential capital structure optimization efforts given the mixed evidence of sustained progress from ongoing operational improvement initiatives
Affirmations
Issuer Frontier Communications Corporation
Speculative Grade Liquidity Rating Affirmed SGL-3
Gtd Senior Secured 2nd lien Global Notes Affirmed B3 (LGD2 from LGD3)
Downgrades
Issuer Frontier Communications Corporation
Corporate Family Rating Downgraded to Caa2 from Caal
Probability of Default Rating Downgraded to Caa3-PD from Caal-PD
Gtd Senior Secured 1s t lien Term Loan B Downgraded to 83 (LGD2) from B2 (LGD2)
Gtd Senior Secured 1st lien Global Notes Downgraded to 83 (LGD2) from 82 (LGD2)
Senior Unsecured Regular BondIDebenture Downgraded to C a a 3 (LGD4) from Caa2 (LGD4)
Underlying Senior Unsecured Regular BondIDebenture Downgraded to Caa3 (LGD4) from C a a 2 (LGD4)
Issuer New Communications Holdings Inc
Senior Unsecured Regular BondjDebenture Downgraded to Caa3 (LGD4) from Caa2 (LGD4)
Outlook Actions
Issuer Frontier Communications Corporation
Outlook Remains Negative
RATINGS RATIONALE
Frontiers Caa2 CFR reflects declining revenue and EBITDA which result from secular and competitive
disclosures in relation to the provisional rating assigned and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating For further information please see the ratings tab on the issuerentity page for the respective issuer on www moodyscom
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action and whose ratings may change as a result of this credit rating action the associated regulatory disclosures will be those of the guarantor entity Exceptions to this approach exist for the following disclosures if applicable to jurisdiction Ancillary Services Disclosure to rated entity Disclosure from rated entity
Regulatory disclosures contained in this press release apply to the credit rating and if applicable the related rating outlook or rating review
Please see wwwmoodyscom for any updates on changes to the lead rating analyst and to the Moodyrsquos legal entity that has issued the rating
Please see the ratings tab on the issuedentity page on wwwmoodyscom for additional regulatory disclosures for each credit rating
Neil Mack CFA Vice President - Senior Analyst Corporate Finance Group Moodyrsquos Investors Service Inc 250 Greenwich Street New York NY 10007 USA JOURNALISTS 1 212 553 0376 Client Service 1 212 553 1653
Lenny J Ajzenman Associate Managing Director Corporate Finance Group JOURNALISTS 1 21 2 553 0376 Client Service 1 212 553 1653
Releasing Office Moodyrsquos Investors Service Inc 250 Greenwich Street New York NY 10007 USA JOURNALISTS 1 212 553 0376 Client Service 1 212 553 1653
I 0 201 9 Moodyrsquos Corporation Moodyrsquos Investors Service Inc Moodyrsquos Analytics Inc andor their licensors and affiliates (collectively ldquoMOODYrsquoS) All rights reserved
CREDIT RATINGS ISSUED BY MOODYrsquoS INVESTORS SERVICE INC AND ITS RATINGS AFFILIATES (ldquoMISrdquo) ARE MOODYrsquoS CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT
MOODYrsquoS PUBLICATIONS MAY INCLUDE MOODYrsquoS CURRENT OPINIONS OF THE RELATIVE
SECURITIES MOODYrsquoS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT SEE MOODYrsquoS RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODYrsquoS RATINGS CREDIT
RISK OF ENTITIES CREDIT COMMITMENTS OR DEBT OR DEBT-LIKE SECURITIES AND
FUTURE CREDIT RISK OF ENTITIES CREDIT COMMITMENTS OR DEBT OR DEBT-LIKE
Moodyrsquos Investors Service Inc a wholly-owned credit rating agency subsidiary of Moodyrsquos Corporation (ldquoMCO) hereby discloses that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by Moodyrsquos Investors Service Inc have prior to assignment of any rating agreed to pay to Moodyrsquos Investors Service Inc for ratings opinions and services rendered by it fees ranging from $1000 to approximately $2700000 MCO and MIS also maintain policies and procedures to address the independence of MISrsquos ratings and rating processes Information regarding certain affiliations that may exist between directors of MCO and rated entities and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5 is posted annually at Governance - Director and Shareholder Aftiliation Policyrdquo
under the heading ldquoInvestor Relations - Corporate
Additional terms for Australia only Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODYrsquoS affiliate Moodyrsquos Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 andor Moodyrsquos Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable) This document is intended to be provided only to ldquowholesale clientsrdquo within the meaning of section 761G of the Corporations Act 2001 By continuing to access this document from within Australia you represent to MOODYrsquoS that you are or are accessing the document as a representative of a ldquowholesale clientrdquo and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to ldquoretail clientsrdquo within the meaning of section 761 G of the Corporations Act 2001 MOODYrsquoS credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer not on the equity securities of the issuer or any form of security that is available to retail investors
Additional terms for Japan only Moodyrsquos Japan KK (ldquoMJKK) is a wholly-owned credit rating agency subsidiary of Moodyrsquos Group Japan GK which is wholly-owned by Moodyrsquos Overseas Holdings Inc a wholly-owned subsidiary of MCO Moodyrsquos SF Japan KK (ldquoMSFJrdquo) is a wholly-owned credit rating agency subsidiary of MJKK MSFJ is not a Nationally Recognized Statistical Rating Organization (ldquoNRSROrdquo) Therefore credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and consequently the rated obligation will not qualify for certain types of treatment under US laws MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No 2 and 3 respectively
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have prior to assignment of any rating agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPYI 25000 to approximately JPY250000000
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements
7252019 Press Release
I
Fitc
Fitch its subsi
Key Rating Drivers
isk Fitch believes the recent addition of board members with ackgrounds in restructuring pose increased event risk for Frontie~s creditors
Asset Sale Frontier has a de~nitive agree~ent to sell its operations in ~ashington Oregon Idaho and ivision Capital LLC ( ~ D ~ ) for $1352 billion in cash ubject to closing adjustments and
plans to use the proceeds which is expected close in I H20 to repay de Fitch estimates the transaction multiple is approximately 5 3 ~ bas d on 2019 estimated EBITDA (Fitch-calculated EBITDA is before restructuring and other charges and a goodwill impairment) for the operations which is 5 below 2018s
on is generally leverage-neutral given Frontiers LTM Fitch-calculated gross debt
Environment Frontiers rating incorporates a challen ing operating envjronment for perators Fitch e
oving EBITDA m cts the company to show improvi albeit stili negative revenue trends in 2019 s and has jmplemented a busin s transformation program Fitch expects
modest ~mprovements in the rate of decline in revenue in 2020 and thereafter
Revenue pressures showed si ns of abating in recent quarters as Frontier re uces churn The company implemented targete price increases with some r e ~ e ~ t i n g the customers off promo nal pricing The effect on EBITDA from t mitigated through cost controls Fitch believes the company needs to continue making progress on improving its revenue t ra jecto~ and e ts Frontiers revenu~ trends to slowly improve from a de~ci t in the mid-single digits in 2019 to the lo igits by the end of the forecast hori~on
r costs of video content an er pace of revenue declin
llion run rate exiting
httpswwwfitchratingscomsiteprlOO8374O 118
7252019 Press Release
Fitch ti f Fronti on their
w 5x range taking into account the sale closes The median multiple for the nine telecom
ultiple for Frontier takes into account its the modest decline in EBITDA
CAF II program
The RCF is as~ume for the secured debt including the ~rst-lien credit and RCFs and the second-lien senior secured notes The wate~all also indicates an RR4 recowe~ for senior unse~ured notes
on default The wate~all analysis results in an 1 ~ e c o w e ~ Ratin
ned to the approximately $450 million of outstandin subsidia~ unsecured debt excluding LLC reflects its s~ructural sen io r i~ to t debt The RR5 assigned to Frontier
Floridas unsecured debt reflects Frontier Florida as a guarantee results in a lower estim pari passu with the secured credit facility
Frontiers secured credit facility The value RR5 for Frontier Floridas unsecure
Derivation Summary
Frontier has a higher exposure to the more volatile residential market compared with Centu~Link lnc Stable) one of its wireline peers and to so
bent wireline operators within the residen erators with faci~ities-base
ommunicatio~s Inc (Fitch s such as voiceower int
httpslwwwfitchratingscornsiteprlOO8374O
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
t
New fork August 12 2019 -- Moodys Investors Service (Moodys) h a s downgraded the corporate family rating (CFR) of Frontier Communications Corporation (Frontier) to Caa2 from Caal and the probability of default rating (PDR) to Caa3-PD from Caal-PD Moodys h a s also downgraded the companys first lien secured term loan B and first lien secured notes to 83 from 82 and affirmed the second lien secured notes a t B3 Moodys downgraded the unsecured notes to Caa3 from Caa2 and affirmed the speculative grade liquidity rating a t SGL-3 The rating outlook is negative
The downgrade of the CFR reflects a n updated assessment of the companys probability of default and recovery expectations following weak second quarter 201 9 revenue and EBITDA results continued negative net customer addition trends and reduced expectations regarding cost efficiency programs going forward Frontiers decision to write down $545 billion of goodwill in the quarter reflected in part concerns regarding the long term sustainability of the companys capital structure and reduced expectations for the overall wireline industry The companys potential to improve weak fundamentals in advance of sizable debt maturities beginning in 2022 remains difficult given a shortening runway to stabilize business trends The potential for distressed debt exchanges in the next year or so is further elevated based on these operating results and other developments including recent appointments of new Board members with restructuring and bankruptcy experience Moodys continues to anticipate a heightened focus on potential capital structure optimization efforts given the mixed evidence of sustained progress from ongoing operational improvement initiatives
Affirmations
Issuer Frontier Communications Corporation
Speculative Grade Liquidity Rating Affirmed SGL-3
Gtd Senior Secured 2nd lien Global Notes Affirmed B3 (LGD2 from LGD3)
Downgrades
Issuer Frontier Communications Corporation
Corporate Family Rating Downgraded to Caa2 from Caal
Probability of Default Rating Downgraded to Caa3-PD from Caal-PD
Gtd Senior Secured 1s t lien Term Loan B Downgraded to 83 (LGD2) from B2 (LGD2)
Gtd Senior Secured 1st lien Global Notes Downgraded to 83 (LGD2) from 82 (LGD2)
Senior Unsecured Regular BondIDebenture Downgraded to C a a 3 (LGD4) from Caa2 (LGD4)
Underlying Senior Unsecured Regular BondIDebenture Downgraded to Caa3 (LGD4) from C a a 2 (LGD4)
Issuer New Communications Holdings Inc
Senior Unsecured Regular BondjDebenture Downgraded to Caa3 (LGD4) from Caa2 (LGD4)
Outlook Actions
Issuer Frontier Communications Corporation
Outlook Remains Negative
RATINGS RATIONALE
Frontiers Caa2 CFR reflects declining revenue and EBITDA which result from secular and competitive
disclosures in relation to the provisional rating assigned and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating For further information please see the ratings tab on the issuerentity page for the respective issuer on www moodyscom
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action and whose ratings may change as a result of this credit rating action the associated regulatory disclosures will be those of the guarantor entity Exceptions to this approach exist for the following disclosures if applicable to jurisdiction Ancillary Services Disclosure to rated entity Disclosure from rated entity
Regulatory disclosures contained in this press release apply to the credit rating and if applicable the related rating outlook or rating review
Please see wwwmoodyscom for any updates on changes to the lead rating analyst and to the Moodyrsquos legal entity that has issued the rating
Please see the ratings tab on the issuedentity page on wwwmoodyscom for additional regulatory disclosures for each credit rating
Neil Mack CFA Vice President - Senior Analyst Corporate Finance Group Moodyrsquos Investors Service Inc 250 Greenwich Street New York NY 10007 USA JOURNALISTS 1 212 553 0376 Client Service 1 212 553 1653
Lenny J Ajzenman Associate Managing Director Corporate Finance Group JOURNALISTS 1 21 2 553 0376 Client Service 1 212 553 1653
Releasing Office Moodyrsquos Investors Service Inc 250 Greenwich Street New York NY 10007 USA JOURNALISTS 1 212 553 0376 Client Service 1 212 553 1653
I 0 201 9 Moodyrsquos Corporation Moodyrsquos Investors Service Inc Moodyrsquos Analytics Inc andor their licensors and affiliates (collectively ldquoMOODYrsquoS) All rights reserved
CREDIT RATINGS ISSUED BY MOODYrsquoS INVESTORS SERVICE INC AND ITS RATINGS AFFILIATES (ldquoMISrdquo) ARE MOODYrsquoS CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT
MOODYrsquoS PUBLICATIONS MAY INCLUDE MOODYrsquoS CURRENT OPINIONS OF THE RELATIVE
SECURITIES MOODYrsquoS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT SEE MOODYrsquoS RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODYrsquoS RATINGS CREDIT
RISK OF ENTITIES CREDIT COMMITMENTS OR DEBT OR DEBT-LIKE SECURITIES AND
FUTURE CREDIT RISK OF ENTITIES CREDIT COMMITMENTS OR DEBT OR DEBT-LIKE
Moodyrsquos Investors Service Inc a wholly-owned credit rating agency subsidiary of Moodyrsquos Corporation (ldquoMCO) hereby discloses that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by Moodyrsquos Investors Service Inc have prior to assignment of any rating agreed to pay to Moodyrsquos Investors Service Inc for ratings opinions and services rendered by it fees ranging from $1000 to approximately $2700000 MCO and MIS also maintain policies and procedures to address the independence of MISrsquos ratings and rating processes Information regarding certain affiliations that may exist between directors of MCO and rated entities and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5 is posted annually at Governance - Director and Shareholder Aftiliation Policyrdquo
under the heading ldquoInvestor Relations - Corporate
Additional terms for Australia only Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODYrsquoS affiliate Moodyrsquos Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 andor Moodyrsquos Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable) This document is intended to be provided only to ldquowholesale clientsrdquo within the meaning of section 761G of the Corporations Act 2001 By continuing to access this document from within Australia you represent to MOODYrsquoS that you are or are accessing the document as a representative of a ldquowholesale clientrdquo and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to ldquoretail clientsrdquo within the meaning of section 761 G of the Corporations Act 2001 MOODYrsquoS credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer not on the equity securities of the issuer or any form of security that is available to retail investors
Additional terms for Japan only Moodyrsquos Japan KK (ldquoMJKK) is a wholly-owned credit rating agency subsidiary of Moodyrsquos Group Japan GK which is wholly-owned by Moodyrsquos Overseas Holdings Inc a wholly-owned subsidiary of MCO Moodyrsquos SF Japan KK (ldquoMSFJrdquo) is a wholly-owned credit rating agency subsidiary of MJKK MSFJ is not a Nationally Recognized Statistical Rating Organization (ldquoNRSROrdquo) Therefore credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and consequently the rated obligation will not qualify for certain types of treatment under US laws MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No 2 and 3 respectively
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have prior to assignment of any rating agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPYI 25000 to approximately JPY250000000
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements
7252019 Press Release
I
Fitc
Fitch its subsi
Key Rating Drivers
isk Fitch believes the recent addition of board members with ackgrounds in restructuring pose increased event risk for Frontie~s creditors
Asset Sale Frontier has a de~nitive agree~ent to sell its operations in ~ashington Oregon Idaho and ivision Capital LLC ( ~ D ~ ) for $1352 billion in cash ubject to closing adjustments and
plans to use the proceeds which is expected close in I H20 to repay de Fitch estimates the transaction multiple is approximately 5 3 ~ bas d on 2019 estimated EBITDA (Fitch-calculated EBITDA is before restructuring and other charges and a goodwill impairment) for the operations which is 5 below 2018s
on is generally leverage-neutral given Frontiers LTM Fitch-calculated gross debt
Environment Frontiers rating incorporates a challen ing operating envjronment for perators Fitch e
oving EBITDA m cts the company to show improvi albeit stili negative revenue trends in 2019 s and has jmplemented a busin s transformation program Fitch expects
modest ~mprovements in the rate of decline in revenue in 2020 and thereafter
Revenue pressures showed si ns of abating in recent quarters as Frontier re uces churn The company implemented targete price increases with some r e ~ e ~ t i n g the customers off promo nal pricing The effect on EBITDA from t mitigated through cost controls Fitch believes the company needs to continue making progress on improving its revenue t ra jecto~ and e ts Frontiers revenu~ trends to slowly improve from a de~ci t in the mid-single digits in 2019 to the lo igits by the end of the forecast hori~on
r costs of video content an er pace of revenue declin
llion run rate exiting
httpswwwfitchratingscomsiteprlOO8374O 118
7252019 Press Release
Fitch ti f Fronti on their
w 5x range taking into account the sale closes The median multiple for the nine telecom
ultiple for Frontier takes into account its the modest decline in EBITDA
CAF II program
The RCF is as~ume for the secured debt including the ~rst-lien credit and RCFs and the second-lien senior secured notes The wate~all also indicates an RR4 recowe~ for senior unse~ured notes
on default The wate~all analysis results in an 1 ~ e c o w e ~ Ratin
ned to the approximately $450 million of outstandin subsidia~ unsecured debt excluding LLC reflects its s~ructural sen io r i~ to t debt The RR5 assigned to Frontier
Floridas unsecured debt reflects Frontier Florida as a guarantee results in a lower estim pari passu with the secured credit facility
Frontiers secured credit facility The value RR5 for Frontier Floridas unsecure
Derivation Summary
Frontier has a higher exposure to the more volatile residential market compared with Centu~Link lnc Stable) one of its wireline peers and to so
bent wireline operators within the residen erators with faci~ities-base
ommunicatio~s Inc (Fitch s such as voiceower int
httpslwwwfitchratingscornsiteprlOO8374O
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
disclosures in relation to the provisional rating assigned and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating For further information please see the ratings tab on the issuerentity page for the respective issuer on www moodyscom
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action and whose ratings may change as a result of this credit rating action the associated regulatory disclosures will be those of the guarantor entity Exceptions to this approach exist for the following disclosures if applicable to jurisdiction Ancillary Services Disclosure to rated entity Disclosure from rated entity
Regulatory disclosures contained in this press release apply to the credit rating and if applicable the related rating outlook or rating review
Please see wwwmoodyscom for any updates on changes to the lead rating analyst and to the Moodyrsquos legal entity that has issued the rating
Please see the ratings tab on the issuedentity page on wwwmoodyscom for additional regulatory disclosures for each credit rating
Neil Mack CFA Vice President - Senior Analyst Corporate Finance Group Moodyrsquos Investors Service Inc 250 Greenwich Street New York NY 10007 USA JOURNALISTS 1 212 553 0376 Client Service 1 212 553 1653
Lenny J Ajzenman Associate Managing Director Corporate Finance Group JOURNALISTS 1 21 2 553 0376 Client Service 1 212 553 1653
Releasing Office Moodyrsquos Investors Service Inc 250 Greenwich Street New York NY 10007 USA JOURNALISTS 1 212 553 0376 Client Service 1 212 553 1653
I 0 201 9 Moodyrsquos Corporation Moodyrsquos Investors Service Inc Moodyrsquos Analytics Inc andor their licensors and affiliates (collectively ldquoMOODYrsquoS) All rights reserved
CREDIT RATINGS ISSUED BY MOODYrsquoS INVESTORS SERVICE INC AND ITS RATINGS AFFILIATES (ldquoMISrdquo) ARE MOODYrsquoS CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT
MOODYrsquoS PUBLICATIONS MAY INCLUDE MOODYrsquoS CURRENT OPINIONS OF THE RELATIVE
SECURITIES MOODYrsquoS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT SEE MOODYrsquoS RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODYrsquoS RATINGS CREDIT
RISK OF ENTITIES CREDIT COMMITMENTS OR DEBT OR DEBT-LIKE SECURITIES AND
FUTURE CREDIT RISK OF ENTITIES CREDIT COMMITMENTS OR DEBT OR DEBT-LIKE
Moodyrsquos Investors Service Inc a wholly-owned credit rating agency subsidiary of Moodyrsquos Corporation (ldquoMCO) hereby discloses that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by Moodyrsquos Investors Service Inc have prior to assignment of any rating agreed to pay to Moodyrsquos Investors Service Inc for ratings opinions and services rendered by it fees ranging from $1000 to approximately $2700000 MCO and MIS also maintain policies and procedures to address the independence of MISrsquos ratings and rating processes Information regarding certain affiliations that may exist between directors of MCO and rated entities and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5 is posted annually at Governance - Director and Shareholder Aftiliation Policyrdquo
under the heading ldquoInvestor Relations - Corporate
Additional terms for Australia only Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODYrsquoS affiliate Moodyrsquos Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 andor Moodyrsquos Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable) This document is intended to be provided only to ldquowholesale clientsrdquo within the meaning of section 761G of the Corporations Act 2001 By continuing to access this document from within Australia you represent to MOODYrsquoS that you are or are accessing the document as a representative of a ldquowholesale clientrdquo and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to ldquoretail clientsrdquo within the meaning of section 761 G of the Corporations Act 2001 MOODYrsquoS credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer not on the equity securities of the issuer or any form of security that is available to retail investors
Additional terms for Japan only Moodyrsquos Japan KK (ldquoMJKK) is a wholly-owned credit rating agency subsidiary of Moodyrsquos Group Japan GK which is wholly-owned by Moodyrsquos Overseas Holdings Inc a wholly-owned subsidiary of MCO Moodyrsquos SF Japan KK (ldquoMSFJrdquo) is a wholly-owned credit rating agency subsidiary of MJKK MSFJ is not a Nationally Recognized Statistical Rating Organization (ldquoNRSROrdquo) Therefore credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and consequently the rated obligation will not qualify for certain types of treatment under US laws MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No 2 and 3 respectively
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have prior to assignment of any rating agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPYI 25000 to approximately JPY250000000
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements
7252019 Press Release
I
Fitc
Fitch its subsi
Key Rating Drivers
isk Fitch believes the recent addition of board members with ackgrounds in restructuring pose increased event risk for Frontie~s creditors
Asset Sale Frontier has a de~nitive agree~ent to sell its operations in ~ashington Oregon Idaho and ivision Capital LLC ( ~ D ~ ) for $1352 billion in cash ubject to closing adjustments and
plans to use the proceeds which is expected close in I H20 to repay de Fitch estimates the transaction multiple is approximately 5 3 ~ bas d on 2019 estimated EBITDA (Fitch-calculated EBITDA is before restructuring and other charges and a goodwill impairment) for the operations which is 5 below 2018s
on is generally leverage-neutral given Frontiers LTM Fitch-calculated gross debt
Environment Frontiers rating incorporates a challen ing operating envjronment for perators Fitch e
oving EBITDA m cts the company to show improvi albeit stili negative revenue trends in 2019 s and has jmplemented a busin s transformation program Fitch expects
modest ~mprovements in the rate of decline in revenue in 2020 and thereafter
Revenue pressures showed si ns of abating in recent quarters as Frontier re uces churn The company implemented targete price increases with some r e ~ e ~ t i n g the customers off promo nal pricing The effect on EBITDA from t mitigated through cost controls Fitch believes the company needs to continue making progress on improving its revenue t ra jecto~ and e ts Frontiers revenu~ trends to slowly improve from a de~ci t in the mid-single digits in 2019 to the lo igits by the end of the forecast hori~on
r costs of video content an er pace of revenue declin
llion run rate exiting
httpswwwfitchratingscomsiteprlOO8374O 118
7252019 Press Release
Fitch ti f Fronti on their
w 5x range taking into account the sale closes The median multiple for the nine telecom
ultiple for Frontier takes into account its the modest decline in EBITDA
CAF II program
The RCF is as~ume for the secured debt including the ~rst-lien credit and RCFs and the second-lien senior secured notes The wate~all also indicates an RR4 recowe~ for senior unse~ured notes
on default The wate~all analysis results in an 1 ~ e c o w e ~ Ratin
ned to the approximately $450 million of outstandin subsidia~ unsecured debt excluding LLC reflects its s~ructural sen io r i~ to t debt The RR5 assigned to Frontier
Floridas unsecured debt reflects Frontier Florida as a guarantee results in a lower estim pari passu with the secured credit facility
Frontiers secured credit facility The value RR5 for Frontier Floridas unsecure
Derivation Summary
Frontier has a higher exposure to the more volatile residential market compared with Centu~Link lnc Stable) one of its wireline peers and to so
bent wireline operators within the residen erators with faci~ities-base
ommunicatio~s Inc (Fitch s such as voiceower int
httpslwwwfitchratingscornsiteprlOO8374O
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
Moodyrsquos Investors Service Inc a wholly-owned credit rating agency subsidiary of Moodyrsquos Corporation (ldquoMCO) hereby discloses that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by Moodyrsquos Investors Service Inc have prior to assignment of any rating agreed to pay to Moodyrsquos Investors Service Inc for ratings opinions and services rendered by it fees ranging from $1000 to approximately $2700000 MCO and MIS also maintain policies and procedures to address the independence of MISrsquos ratings and rating processes Information regarding certain affiliations that may exist between directors of MCO and rated entities and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5 is posted annually at Governance - Director and Shareholder Aftiliation Policyrdquo
under the heading ldquoInvestor Relations - Corporate
Additional terms for Australia only Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODYrsquoS affiliate Moodyrsquos Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 andor Moodyrsquos Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable) This document is intended to be provided only to ldquowholesale clientsrdquo within the meaning of section 761G of the Corporations Act 2001 By continuing to access this document from within Australia you represent to MOODYrsquoS that you are or are accessing the document as a representative of a ldquowholesale clientrdquo and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to ldquoretail clientsrdquo within the meaning of section 761 G of the Corporations Act 2001 MOODYrsquoS credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer not on the equity securities of the issuer or any form of security that is available to retail investors
Additional terms for Japan only Moodyrsquos Japan KK (ldquoMJKK) is a wholly-owned credit rating agency subsidiary of Moodyrsquos Group Japan GK which is wholly-owned by Moodyrsquos Overseas Holdings Inc a wholly-owned subsidiary of MCO Moodyrsquos SF Japan KK (ldquoMSFJrdquo) is a wholly-owned credit rating agency subsidiary of MJKK MSFJ is not a Nationally Recognized Statistical Rating Organization (ldquoNRSROrdquo) Therefore credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and consequently the rated obligation will not qualify for certain types of treatment under US laws MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No 2 and 3 respectively
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds debentures notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have prior to assignment of any rating agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPYI 25000 to approximately JPY250000000
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements
7252019 Press Release
I
Fitc
Fitch its subsi
Key Rating Drivers
isk Fitch believes the recent addition of board members with ackgrounds in restructuring pose increased event risk for Frontie~s creditors
Asset Sale Frontier has a de~nitive agree~ent to sell its operations in ~ashington Oregon Idaho and ivision Capital LLC ( ~ D ~ ) for $1352 billion in cash ubject to closing adjustments and
plans to use the proceeds which is expected close in I H20 to repay de Fitch estimates the transaction multiple is approximately 5 3 ~ bas d on 2019 estimated EBITDA (Fitch-calculated EBITDA is before restructuring and other charges and a goodwill impairment) for the operations which is 5 below 2018s
on is generally leverage-neutral given Frontiers LTM Fitch-calculated gross debt
Environment Frontiers rating incorporates a challen ing operating envjronment for perators Fitch e
oving EBITDA m cts the company to show improvi albeit stili negative revenue trends in 2019 s and has jmplemented a busin s transformation program Fitch expects
modest ~mprovements in the rate of decline in revenue in 2020 and thereafter
Revenue pressures showed si ns of abating in recent quarters as Frontier re uces churn The company implemented targete price increases with some r e ~ e ~ t i n g the customers off promo nal pricing The effect on EBITDA from t mitigated through cost controls Fitch believes the company needs to continue making progress on improving its revenue t ra jecto~ and e ts Frontiers revenu~ trends to slowly improve from a de~ci t in the mid-single digits in 2019 to the lo igits by the end of the forecast hori~on
r costs of video content an er pace of revenue declin
llion run rate exiting
httpswwwfitchratingscomsiteprlOO8374O 118
7252019 Press Release
Fitch ti f Fronti on their
w 5x range taking into account the sale closes The median multiple for the nine telecom
ultiple for Frontier takes into account its the modest decline in EBITDA
CAF II program
The RCF is as~ume for the secured debt including the ~rst-lien credit and RCFs and the second-lien senior secured notes The wate~all also indicates an RR4 recowe~ for senior unse~ured notes
on default The wate~all analysis results in an 1 ~ e c o w e ~ Ratin
ned to the approximately $450 million of outstandin subsidia~ unsecured debt excluding LLC reflects its s~ructural sen io r i~ to t debt The RR5 assigned to Frontier
Floridas unsecured debt reflects Frontier Florida as a guarantee results in a lower estim pari passu with the secured credit facility
Frontiers secured credit facility The value RR5 for Frontier Floridas unsecure
Derivation Summary
Frontier has a higher exposure to the more volatile residential market compared with Centu~Link lnc Stable) one of its wireline peers and to so
bent wireline operators within the residen erators with faci~ities-base
ommunicatio~s Inc (Fitch s such as voiceower int
httpslwwwfitchratingscornsiteprlOO8374O
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7252019 Press Release
I
Fitc
Fitch its subsi
Key Rating Drivers
isk Fitch believes the recent addition of board members with ackgrounds in restructuring pose increased event risk for Frontie~s creditors
Asset Sale Frontier has a de~nitive agree~ent to sell its operations in ~ashington Oregon Idaho and ivision Capital LLC ( ~ D ~ ) for $1352 billion in cash ubject to closing adjustments and
plans to use the proceeds which is expected close in I H20 to repay de Fitch estimates the transaction multiple is approximately 5 3 ~ bas d on 2019 estimated EBITDA (Fitch-calculated EBITDA is before restructuring and other charges and a goodwill impairment) for the operations which is 5 below 2018s
on is generally leverage-neutral given Frontiers LTM Fitch-calculated gross debt
Environment Frontiers rating incorporates a challen ing operating envjronment for perators Fitch e
oving EBITDA m cts the company to show improvi albeit stili negative revenue trends in 2019 s and has jmplemented a busin s transformation program Fitch expects
modest ~mprovements in the rate of decline in revenue in 2020 and thereafter
Revenue pressures showed si ns of abating in recent quarters as Frontier re uces churn The company implemented targete price increases with some r e ~ e ~ t i n g the customers off promo nal pricing The effect on EBITDA from t mitigated through cost controls Fitch believes the company needs to continue making progress on improving its revenue t ra jecto~ and e ts Frontiers revenu~ trends to slowly improve from a de~ci t in the mid-single digits in 2019 to the lo igits by the end of the forecast hori~on
r costs of video content an er pace of revenue declin
llion run rate exiting
httpswwwfitchratingscomsiteprlOO8374O 118
7252019 Press Release
Fitch ti f Fronti on their
w 5x range taking into account the sale closes The median multiple for the nine telecom
ultiple for Frontier takes into account its the modest decline in EBITDA
CAF II program
The RCF is as~ume for the secured debt including the ~rst-lien credit and RCFs and the second-lien senior secured notes The wate~all also indicates an RR4 recowe~ for senior unse~ured notes
on default The wate~all analysis results in an 1 ~ e c o w e ~ Ratin
ned to the approximately $450 million of outstandin subsidia~ unsecured debt excluding LLC reflects its s~ructural sen io r i~ to t debt The RR5 assigned to Frontier
Floridas unsecured debt reflects Frontier Florida as a guarantee results in a lower estim pari passu with the secured credit facility
Frontiers secured credit facility The value RR5 for Frontier Floridas unsecure
Derivation Summary
Frontier has a higher exposure to the more volatile residential market compared with Centu~Link lnc Stable) one of its wireline peers and to so
bent wireline operators within the residen erators with faci~ities-base
ommunicatio~s Inc (Fitch s such as voiceower int
httpslwwwfitchratingscornsiteprlOO8374O
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7252019 Press Release
Fitch ti f Fronti on their
w 5x range taking into account the sale closes The median multiple for the nine telecom
ultiple for Frontier takes into account its the modest decline in EBITDA
CAF II program
The RCF is as~ume for the secured debt including the ~rst-lien credit and RCFs and the second-lien senior secured notes The wate~all also indicates an RR4 recowe~ for senior unse~ured notes
on default The wate~all analysis results in an 1 ~ e c o w e ~ Ratin
ned to the approximately $450 million of outstandin subsidia~ unsecured debt excluding LLC reflects its s~ructural sen io r i~ to t debt The RR5 assigned to Frontier
Floridas unsecured debt reflects Frontier Florida as a guarantee results in a lower estim pari passu with the secured credit facility
Frontiers secured credit facility The value RR5 for Frontier Floridas unsecure
Derivation Summary
Frontier has a higher exposure to the more volatile residential market compared with Centu~Link lnc Stable) one of its wireline peers and to so
bent wireline operators within the residen erators with faci~ities-base
ommunicatio~s Inc (Fitch s such as voiceower int
httpslwwwfitchratingscornsiteprlOO8374O
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7252019 Press Release
lin S
r
ins
Key Assumptions
-- ect ecline in th fter
s to 70 bps annu Ily relative to the Fitch-calculated
st period capital sale of the operations in
the ~ o ~ h w e s t
taxes are nominal in 2019-2022 Fitch assumes that the company is able to use that may be due on the asset sale
--The sale of the oper~tions in the ~ o ~ h w e s ~ closes on July 1 2020 Proceeds are used to reduce debt by $13 billion in 2020
RATING SENSITIVITIES
~eveiopments That ivjdually or Collectively
--Successful execution of its business transformatior revenue and EBITDA trends
to Positive ~ a t i n g Action
plan such that the company demonstrates stabile
--FCF ~ a r g i n s sustaine in the mid to high single digits
--An expectation that the company will be able to successfully refinance 2022 and 2023 senior unsecure maturities
~e~e lopments That Individually or ~ollectively Le
ectation that the company will stru atur~ties pr i~ar i iy the unsecured notes due in 2022
38
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7252019 Press Release
t Structure
rities on the revolver an
illion remains outstandi series of notes maturin f notes maturing in 20 notes ~a tur ing in 2021
Id first come into play for $500 the current principal a ~ o u n t s outsta
the amounts o respectively
Frontier borrowed an incremental 240 million on its senior secured term lo n euro3 facility in July 2018 ~roceeds were used to repay all borrowings under its Go due in October 2019 and to pay down a small po~ ion of the COB agreements with J
facility due in 2021 Frontier also obtained technical amendments to its credit rgan Chase Bank and nk to replace certain operat~ng subsid ia~ equity provided to the former pledge subsidiaries) with equity pledges of direct inter~ediate diaries of Frontier not previously pledged The change increases the percentage of ssets in the securi
Fitch expects ~nancial flexibility to be relatively solid with FCF in the mid to high single digits as a percentage of revenue An excess cash flow (ECF) sweep is in effect on the term loan requirin manda to~ prepayments of 25 and 50 of ECF if year-end net d e b ~ ~ B l T D A is above 5QOx an 525x respectively No p a y ~ e n t in 201 9 under the ECF sweep is re uired based on year-end 201 net deb~E~ lTDA
Summary of Financial Adjustments
t h r
https~~t~hratingscomsitepr10083740 418
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7252019 Press Release
RATING ACTIONS
senior unsecured
Frontier California Inc
senior unsecured
Frontier Florida LLC
senior unsecured
Frontier North Inc
senior unsecured
Frontier Southwest Inc
senior secured
Frontier Communications
senior unsecured
senior secured
Senior Secured 2nd Lien
A ~ ~ ~ t i o n a l i n fo r~a t~on is ~ v ~ ~ i a b i ~ on f itc~ratingsco~
FlTCH RATINGS ANALYSTS
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7252019 Press Release
Primary Rating Analyst John Culver CFA Senior Director + I 312 368 3216 Fitch Ratings Inc 70 West Madison Street Chicago 60602
Secondary Rating Analyst Salonie Sehgal Associate Director + I 312 368 3137
Committee Chairperson David Peterson Senior Director + I 312 368 3177
MEDIA CONTACTS
Elizabeth Fogerty New York + I 212 908 0526 elizabethfogertythefitchgrou pcom
Applicable Criteria
Corporates ~otchi f l Parent and Subsidi ~orporate ~ a t i n g
Add i t iona I Disclosures
Dodd-Frank Ratin l ~ f o r m ~ t i o n Disclosure Form Solicitation Status Endorsement Policy
DISCLAIMER
https~~tchratingscomsiteprl0083740 618
7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
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7252019 Press Release
IGHT
veri~cation can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete ~ltimately the issuer and its advisers are resp~nsible for the accuracy of the infor~ation they provide to Fitch and to the market in offering documents and other reports In issuing its ratings and its reports Fitch must rely on th work of experts including indepen ent auditors with respect to financial state~ents and attorneys with respect to legal and tax matters Further ratings an forecasts of financial and other information are inherently f o ~ a r nd embody assumptions and predictions about future events
y their nature cannot be v e r i ~ e ~ a a result despite any veri~cation of current facts ratings and forecasts can be affected by future events or conditjons that were not anticipated at t e time a rating or forecast was issued or af f i r~ed The information in this re does not represent or wa
as is wi th~ut any representation or warranty of any kind and Fitch port or any of its contents will meet any of the requirements of a
r e d i ~ o ~ h i n e s s of a security This opinion and es that Fitch is continuously evaluat uct of Fitch and no indiwidual or gro s not address the risk of loss due to h is not engaged in the offer or sale of
ort were involved in for contact purposes
and updating Therefore r of indiwiduals is solely res risks other than credit risk
nor a substitu h the sale of the securities
https~~~tchratingscomsiteprl0083740
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88
7z52112 9 Press Release
SOLICITATION STATUS
The ratings above were solicite assigned or maintained at the request of the rated entityissuer or a tions follow below
Endorsement Policy
Fitchs approach to ratings endorse~ent so that ratings produ~ed outside the EU may be used by regulated entities within the EU for regulato~ pur oses pursuant to the terms of the EU Regulation with respect to credit rating agencies can be found on the EU R ~ g u l a t o ~ isc closures page The endorse~en~ status of all International ratings is provided within the entity summa^ page for each rated entity and in the transa~tion detail pages for all structured ~nance transactio~s on the Fitch website These disclosures are update daily basis
Fitch Updates Terms of Use amp Privacy Policy
We have updated our Terms of Use and Privacy Policies which cover all of Fitch Groups websites Learn more
httpswwwfitchratingscomsiteprf 0083740 88