Frontier taps into more fiber assets to raise $750M

Frontier's $750 million fiber securitization offering will be used to pay down its term loan and may help with fiber expansion and copper migration.

Jeff Baumgartner, Senior Editor

June 3, 2024

3 Min Read
Money printing machine printing 100 dollar banknotes
(Source: Cigdem Simsek/Alamy Stock Photo)

Frontier intends to raise $750 million by securitizing fiber assets and associated contracts in North Texas. Frontier will use the funds to help repay debt and possibly for investments, fiber expansion and copper migrations.

Frontier said the notes will be secured by certain of Frontier's fiber assets and associated customer contracts in North Texas and will qualify as an offering of "green bonds," which generally are applied toward new or existing sustainable projects.

Frontier has set an anticipated repayment date of May 2031.

The company also noted that the offer will be made through a "limited-purpose, bankruptcy remote, indirect subsidiary" of Frontier. Bankruptcy remote labels are typically applied to single-purpose entities used for securitizations.

The company has been asked for more details about the north Texas assets, including specific markets contained within them and the number of homes passed and customers served by that portion of Frontier's network.

A path well taken

Frontier has taken the securitization path before. Last July, Frontier offered about $1.05 billion in debt secured by fiber assets and customer contracts in the Dallas area. That figure was later raised to $1.6 billion and then $2.1 billion.

Those funds are being used to help finance Frontier's plan to build fiber to 10 million locations. Frontier added about 322,000 fiber passings in Q1 2024, extending that total to 6.8 million, putting it 68% toward its goal. The company expects to pass an additional 1.3 million homes with fiber for the full year 2024.

In a research note issued this morning, New Street Research analyst Jonathan Chaplin pointed out that Frontier has about $1.5 billion of cash and cash equivalents on its balance sheet (as of Q1 2024).

He added that a new and successful offering, while modest, locks in Frontier's access to the asset-backed security (ABS) market.

"They don't technically need to raise debt until mid-2025 at the earliest; however, management has said they want to be in the market every 12-18 months, so this deal is not surprising," Chaplin explained. Frontier recently amended its credit facility to allow secured debt up to $5.5 billion, up from a prior cap of $2.5 billion, he added.

Frontier is also in the midst of a formal review process that is exploring multiple options, including optimizing Frontier's operations and finances and exploring strategic partnerships, joint ventures, divestitures, mergers and other business combinations. Frontier has delayed its investor day (originally planned for the second quarter of 2024) until it can obtain more insight from the strategic review.

New Street has speculated that Frontier could move its "Wave 3" assets in a joint venture with a financial partner similar in structure to the Gigapower joint venture formed by AT&T and BlackRock. Wave 3 refers to about 5 million locations in Frontier's footprint that are not covered by the current 10 million locations tucked into the telco's Wave 1 and Wave 2 footprint.

Update: Late last month, Frontier amended its revolving credit facility to boost the amount of security debt the company may issue and requires that a portion of the proceeds be used to refinance first lien debt.

Under those terms, as New Street noted, Frontier increased its combined cap on certain first lien debt, securitization and receivables facilities, and non-loan party debt from $2.5 billion to $5.5 billion. Securitization is currently limited to Frontier's assets in Texas and Florida, two of the company's larger fiber markets, Frontier noted.

"This amendment will allow for additional securitizations alongside more traditional bank and bond financings, while working to ensure first lien holders are not disadvantaged," Frontier CFO Scott Beasley said in a statement at the time.

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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