Frontier Communications, about a year after filing for Chapter 11 protection, received the final state approval of its reorganization plan, which the company said sets it on a path toward emerging from bankruptcy in “the coming weeks.”
Frontier filed for Chapter 11 protection on April 15, 2020. The company had worked out a restructuring plan that would exchange about $10.2 billion in debt for equity, and funnel about $1.4 billion toward building out fiber networks throughout its service territory. On April 15, 2021, the company received the final approval of its plan from the California Public Utilities Commission, which it said was the last hurdle in the bankruptcy process.
“Having already received all other required state and federal approvals, the Company expects to successfully emerge from Chapter 11 in the coming weeks,” Frontier said in a press release.
Frontier stock, currently trading on the over-the-counter “pink sheets,” was priced at about 29 cents per share in early trading April 19, down about 5%. Once the company emerges from bankruptcy, it plans to return to trading on the full Nasdaq Exchange under the new trading symbol FYBR, which MoffettNathanson telecom analyst Nick Del Deo said in a note to clients “may be a bit corny, but it leaves no uncertainty regarding management’s focus.”
According to the California PUC’s proposed decision to approve the reorganization in March, Frontier would have to invest about $1.75 billion in its fiber network in the state over the next four years, including expanding broadband availability in unserved or underserved communities. As part of that condition, Frontier would build out fiber to 350,000 customer locations by Dec. 31, 2026, of which 150,000 locations must be in areas where Frontier has lower rates of return.
As it nears the bankruptcy exit, Del Deo, who initiated coverage of the stock on April 19, added that he believes with new management, more manageable leverage and funds earmarked for an aggressive fiber buildout, Frontier could overcome the hurdles of the past. Frontier named former Vodafone UK CEO Nick Jeffery as its CEO in December.
The analyst added that the company has identified millions of homes in its footprint that could be upgraded to fiber at attractive returns, “which would put the business on a sustainable path and potentially create billions of dollars in value.”
But he cautioned that although Frontier will emerge with substantially lower debt -- about $7 billion -- only about one-third of its total revenue comes from fiber services, with more than half coming from its struggling commercial unit.
“A successful transformation would likely bring Frontier to revenue stability or modest growth, but not make it a star,” Del Deo wrote.
