Long-Term Debt

12 Months Ended

Dec. 31, 2019

(9)

Long-Term Debt:

Subsequent Event

For information about subsequent events related to the Restructuring, refer to Note 23.

The activity in our long-term debt from January 1, 2019 to December 31, 2019 is summarized as follows:

				For the year ended December 31, 2019
($ in millions)	January 1, 2019			Payments and Retirements			New Borrowings		December 31, 2019			Interest Rate at December 31, 2019*

Secured debt issued by Frontier	$	5,246		$	(2,134	)	$	2,599	$	5,711			7.24	%
Unsecured debt issued by Frontier		11,297			(348	)		-		10,949			9.62	%
Secured debt issued by subsidiaries		107			(1	)		-		106			8.36	%
Unsecured debt issued by subsidiaries		750			-			-		750			6.90	%
Total debt	$	17,400		$	(2,483	)	$	2,599	$	17,516			8.72	%

Less: Debt Issuance Costs		(178	)							(168	)
Less: Debt Premium/(Discount)		(50	)							(46	)
Less: Current Portion		(814	)							(994	)
	$	16,358							$	16,308

* Interest rate includes amortization of debt issuance costs and debt premiums or discounts. The interest rates at December 31, 2019 represent a weighted average of multiple issuances.

Additional information regarding our senior unsecured debt, senior secured debt and subsidiary debt at December 31, 2019 and 2018 is as follows:

	December 31, 2019					December 31, 2018
($ in millions)	Principal Outstanding		Interest Rate			Principal Outstanding		Interest Rate

Secured debt issued by Frontier
Term loan due 3/31/2021 ⁽¹⁾	$	-				$	1,402	5.280% (Variable)
Term loan due 10/12/2021⁽²⁾		-					239	7.405% (Variable)
Revolver due 2/27/2024⁽³⁾		749	4.760% (Variable)				275	5.280% (Variable)
Term loan due 6/15/2024 ⁽⁴⁾		1,699	5.550% (Variable)				1,716	6.280% (Variable)
First lien notes due 4/1/2027		1,650		8.000	%		-
Second lien notes due 4/1/2026		1,600		8.500	%		1,600		8.500	%
IDRB due 5/1/2030		13		6.200	%		13		6.200	%
Equipment financings		-					1		0.000	%
Total secured debt issued by Frontier		5,711					5,246

Unsecured debt issued by Frontier
Senior notes due 3/15/2019		-					348		7.125	%
Senior notes due 4/15/2020		172		8.500	%		172		8.500	%
Senior notes due 9/15/2020		55		8.875	%		55		8.875	%
Senior notes due 7/1/2021		89		9.250	%		89		9.250	%
Senior notes due 9/15/2021		220		6.250	%		220		6.250	%
Senior notes due 4/15/2022		500		8.750	%		500		8.750	%
Senior notes due 9/15/2022		2,188		10.500	%		2,188		10.500	%
Senior notes due 1/15/2023		850		7.125	%		850		7.125	%
Senior notes due 4/15/2024		750		7.625	%		750		7.625	%
Senior notes due 1/15/2025		775		6.875	%		775		6.875	%
Senior notes due 9/15/2025		3,600		11.000	%		3,600		11.000	%
Debentures due 11/1/2025		138		7.000	%		138		7.000	%
Debentures due 8/15/2026		2		6.800	%		2		6.800	%
Senior notes due 1/15/2027		346		7.875	%		346		7.875	%
Senior notes due 8/15/2031		945		9.000	%		945		9.000	%
Debentures due 10/1/2034		1		7.680	%		1		7.680	%
Debentures due 7/1/2035		125		7.450	%		125		7.450	%
Debentures due 10/1/2046		193		7.050	%		193		7.050	%
Total unsecured debt issued by Frontier		10,949					11,297

Secured debt issued by subsidiaries
Debentures due 11/15/2031		100		8.500	%		100		8.500	%
RUS loan contracts due 1/3/2028		6		6.154	%		7		6.154	%
Total secured debt issued by subsidiaries		106					107

Unsecured debt issued by subsidiaries
Debentures due 5/15/2027		200		6.750	%		200		6.750	%
Debentures due 2/1/2028		300		6.860	%		300		6.860	%
Debentures due 2/15/2028		200		6.730	%		200		6.730	%
Debentures due 10/15/2029		50		8.400	%		50		8.400	%
Total unsecured debt issued by subsidiaries		750					750

Total debt	$	17,516		8.486	%⁽⁵⁾	$	17,400		8.411	%⁽⁵⁾

⁽¹⁾

Represents borrowings under the JPM Credit Agreement Term Loan A, as defined below.

⁽²⁾

Represents borrowings under the 2016 CoBank Credit Agreement, as defined below.

⁽³⁾

Represents borrowings under the JPM Credit Agreement Revolver, as defined below.

⁽⁴⁾

Represents borrowings under the JPM Credit Agreement Term Loan B, as defined below.

⁽⁵⁾

Interest rate represents a weighted average of the stated interest rates of multiple issuances.

Term Loan and Revolving Credit Facilities

JP Morgan Credit Facilities

On February 27, 2017, Frontier entered into a first amended and restated credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which Frontier combined its revolving credit agreement, dated as of June 2, 2014, and its term loan credit agreement, dated as of August 12, 2015. Under the JPM Credit Agreement (as amended to date, the JPM Credit Agreement), Frontier has a $1,740 million senior secured Term Loan B facility (the Term Loan B) maturing on June 15, 2024 and an $850 million secured revolving credit facility maturing on February 27, 2024 (the Revolver). The maturities of the Term Loan B and the Revolver, in each case if still outstanding, will be accelerated in the following circumstances: (i) if, 91 days before the maturity date of any series of Senior Notes maturing in 2020, 2023 and 2024, more than $500 million in principal amount remains outstanding on such series; or (ii) if, 91 days before the maturity date of the first series of Senior Notes maturing in 2021 or 2022, more than $500 million in principal amount remains outstanding, in the aggregate, on the two series of Senior Notes maturing in such year. As of December 31, 2019, approximately $227 million principal amount, in the aggregate, remains outstanding on the two series of senior notes maturing in 2020 and $309 million principal amount, in the aggregate, remains outstanding on the two series of senior notes maturing in 2021.

The determination of interest rates for the Term Loan B and Revolver under the JPM Credit Agreement is based on margins over the Base Rate (as defined in the JPM Credit Agreement) or over LIBOR, at the election of Frontier. Interest rate margins on the Revolver (ranging from 1.00% to 2.00% for Base Rate borrowings and 2.00% to 3.00% for LIBOR borrowings) are subject to adjustment based on Frontier’s Leverage Ratio (as defined in the JPM Credit Agreement). The interest rate on the Revolver as of December 31, 2019 was LIBOR plus 3.00%. Interest rate margins on the Term Loan B (2.75% for Base Rate borrowings and 3.75% for LIBOR borrowings) are not subject to adjustment. The security package under the JPM Credit Agreement includes pledges of the equity interests in certain Frontier subsidiaries and guarantees by certain Frontier subsidiaries.

As of December 31, 2019, Frontier had borrowings of $749 million outstanding under the Revolver (with letters of credit issued under the Revolver totaling an additional $101 million). In July 2019, a $20 million Letter of Credit issued under the Bank of Tokyo LC agreement was replaced by a Letter of Credit issued under the Revolver.

On March 15, 2019, Frontier amended the JPM Credit Agreement to, among other things, extend the maturity date of the Revolver from February 27, 2022 to February 27, 2024 (subject to springing maturity to any tranche of our existing debt with an aggregate outstanding principal amount in excess of $500 million), increase the interest rate applicable to loans under the Revolver by 0.25% and make certain modifications to the debt and restricted payment covenants. On April 26, 2019, Frontier further amended the JPM Credit Agreement to, among other things, extend the maturity date of the outstanding small tranche of loans under the Revolver that had not been party to the March 2019 amendments.

Frontier also had a $1,625 million senior secured Term Loan A facility (the Term Loan A) under the JPM Credit Agreement which was fully repaid on March 15, 2019, as described below under “New Debt Issuances and Debt Reductions.”

On January 25, 2018, Frontier amended the JPM Credit Agreement to, among other things, expand the security package to include the interests of certain subsidiaries previously not pledged and replace the leverage ratio maintenance test with a first lien leverage ratio maintenance test. On July 3, 2018, Frontier further amended the JPM Credit Agreement to, among other things, replace certain operating subsidiary equity pledges with pledges of the equity interest of certain direct subsidiaries of Frontier.

Repaid CoBank Credit Facilities

Frontier had a $315 million senior term loan facility drawn in October 2016 (the 2016 CoBank Credit Agreement) with CoBank, ACB, as administrative agent, lead arranger and a lender, and the other lenders which was repaid in full on March 15, 2019. Frontier had a separate $350 million senior term loan facility drawn in 2014 (the 2014 CoBank Credit Agreement) with CoBank which was repaid in full on July 3, 2018. Details of both transactions are described below under “New Debt Issuances and Debt Reductions.”

As of December 31, 2019, we were in compliance with all of our covenants under our indentures and the JPM Credit Agreement.

New Debt Issuances and Debt Reductions:

On March 15, 2019, Frontier completed a private offering of $1,650 million aggregate principal amount of 8.000% First Lien Secured Notes due 2027 (the First Lien Notes). The First Lien Notes are guaranteed by each of the Company’s subsidiaries that guarantees the JPM Credit Agreement, including the Term Loan B and Revolver. The guarantees are unsecured obligations of the guarantors equal in right of payment to all of the guarantor’s obligations under the JPM Credit Agreement and certain other permitted future senior indebtedness and senior in right of payment to all subordinated obligations of the guarantors. The First Lien Notes are secured on a first-priority basis by all the assets that secure the Company’s obligations under the JPM Credit Agreement on a first-priority basis. Interest on the First Lien Notes is payable to holders of record semi-annually in arrears on April 1 and October 1 of each year, commencing October 1, 2019.

Additionally, on March 15, 2019, Frontier used the proceeds from the offering of First Lien Notes, together with cash on hand, to (i) repay in full the outstanding borrowings under the senior secured Term Loan A facility under the JPM Credit Agreement, which otherwise would have matured in March 2021, (ii) repay in full the outstanding borrowings under the 2016 CoBank Credit Agreement, which otherwise would have matured in October 2021, and (iii) pay related interest, fees and expenses.

For the year ended December 31, 2019, Frontier retired $348 million principal amount of 7.125% senior unsecured notes due 2019.

During the year ended December 31, 2019, Frontier recorded a loss on early extinguishment of debt of $20 million driven primarily by the write-off of unamortized original issuance costs associated with the retired Term Loan A and 2016 CoBank Credit Agreement.

On March 19, 2018, Frontier completed a private offering of $1,600 million aggregate principal amount of 8.500% Second Lien Secured Notes due 2026 (the “Second Lien Notes”). The Second Lien Notes are guaranteed by each of the Company’s subsidiaries that guarantees the JPM Credit Agreement. The guarantees are unsecured obligations of the guarantors and subordinated in right of payment to all of the guarantor’s obligations under the Company’s JPM Credit Agreement and certain other permitted future senior indebtedness but equal in right of payment with all other unsubordinated obligations of the guarantors. The Second Lien Notes indenture provides that (a) the aggregate amount of all guaranteed obligations guaranteed by the guarantors are limited and shall not, at any time, exceed the lesser of (x) the principal amount of the Second Lien Notes then outstanding and (y) the Maximum Guarantee Amount (as defined in the Second Lien Notes indenture), and (b) for the avoidance of doubt, nothing in the Second Lien Notes indenture shall, on any date or from time to time, allow the aggregate amount of all such guaranteed obligations guaranteed by the guarantors to cause or result in the Company or any subsidiary violating any indenture governing the Company’s existing senior notes.

The Second Lien Notes are secured on a second-priority basis by all the assets that secure Frontier’s obligations under the JPM Credit Agreement on a first-priority basis. The collateral securing the Second Lien Notes and the JPM Credit Agreement is limited to the equity interests of certain subsidiaries of the Company and substantially all personal property of Frontier Video Services, Inc. The Second Lien Notes bear interest at a rate of 8.500% per annum and mature on April 1, 2026. Interest on the Second Lien Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing October 1, 2018. On July 3, 2018, the collateral package for the Second Lien Notes was amended to replace certain operating subsidiary equity pledges with pledges of the equity interests of certain direct subsidiaries of Frontier, consistent with amendments made to the JPM Credit Agreement.

On July 3, 2018, the Company entered into Increase Joinder No. 2 to the JPM Credit Agreement, pursuant to which the Company borrowed an incremental $240 million under the Term Loan B maturing in 2024. The Company used the incremental borrowings to repay in full the 2014 CoBank Credit Agreement, repay a portion of the 2016 CoBank Credit Agreement and pay certain fees and expenses related to this incremental borrowing.

On October 1, 2018, Frontier retired $431 million principal amount outstanding of 8.125% senior notes due 2018 at maturity.

During 2018, Frontier retired $828 million principal amount of senior indebtedness and made open market purchases of $117 million of senior unsecured notes consisting of $61 million of 8.125% senior notes due 2018 and $56 million of 7.125% senior notes due 2019. Additionally, Frontier used cash proceeds from the $1,600 million Second Lien Notes offering and cash on hand to retire an aggregate principal amount of $1,651 million senior unsecured notes prior to maturity, consisting of $447 million of 8.500% senior notes due 2020, $249 million 8.875% senior notes due 2020, $555 million of 6.250% senior notes due 2021, and $400 million of 9.250% senior notes due 2021. Additionally, Frontier used cash proceeds from the $240 million incremental borrowing under Term Loan B to repay in full the 2014 CoBank Credit Agreement and repay a portion of the 2016 CoBank Credit Agreement, as well as pay certain fees and expenses related to this incremental borrowing.

During 2018, Frontier recorded a gain on early extinguishment of debt of $32 million driven primarily by discounts received on the retirement of certain notes, slightly offset by premiums paid to retire certain notes and unamortized original issuance costs.

On June 15, 2017, the Company entered into Increase Joinder No. 1 to the JPM Credit Agreement, pursuant to which the Company borrowed $1,500 million. The Company used the borrowings to fund the open market purchases of certain unsecured Senior notes during 2017.

During 2017, Frontier used proceeds from Term Loan B (see definition and note discussion above) and cash on hand to retire $763 million of 8.875% Notes due 2020, $550 million of 8.500% Notes due 2020, $92 million of 8.125% Notes due 2018, $30 million of 7.125% Notes due 2019, and $10 million of 9.250% Notes due 2021. Frontier recorded a loss of $88 million driven primarily by premiums on the retirement of the notes. Additionally, Frontier used cash available on hand for the scheduled retirement of $210 million of 8.25% Senior Notes at maturity.

Our scheduled principal payments are as follows as of December 31, 2019. This does not reflect outstanding borrowings under the Revolver.

($ in millions)	Principal Payments

2020	$	245
2021	$	327
2022	$	2,706
2023	$	868
2024	$	2,380
Thereafter	$	10,241

Other Obligations

During 2018, Frontier contributed real estate properties with an aggregate fair value of $37 million for the purpose of funding a portion of its contribution obligations to its qualified defined benefit pension plan. The pension plan obtained independent appraisals of the property and, based on these appraisals, the pension plan recorded the contributions at aggregate fair value of $37 million for 2018. Frontier has entered into a lease for the contributed properties. The properties are managed on behalf of the pension plan by an independent fiduciary, and the terms of the lease were negotiated with the fiduciary on an arm’s-length basis.

For properties contributed in 2018, leases have initial terms of 20 years at a combined average aggregate annual rent of approximately $5 million.

The contribution and leaseback of the properties were treated as financing transactions and, accordingly, Frontier continues to depreciate the carrying value of the property in its financial statements and no gain or loss was recognized. An obligation of $37 million was recorded in our consolidated balance sheet within “Other liabilities” as of December 31, 2019 and the liability is reduced annually by a portion of the lease payments made to the pension plan. Under the new lease standard, liabilities for these finance transactions are included in our financing lease liabilities. Refer to Note 11 for additional details.

During 2017, Frontier modified certain operating leases for vehicles which resulted in the classification as capital leases. These agreements have lease terms of 1 to 7 years. These capital lease obligations are classified as financing lease liabilities and included in our consolidated balance sheet within “Other liabilities” and “Other current liabilities.” Refer to Note 11 for additional details.