Long-Term Debt

9 Months Ended

Sep. 30, 2020

(10) Long-Term Debt:

The filing of the Chapter 11 Cases constituted an event of default that accelerated substantially all of our obligations under the JPM Credit Agreement, the Original First Lien Notes, the Second Lien Notes, our unsecured notes and debentures and the secured and unsecured debentures of our subsidiaries. As such we have reclassified certain subsidiary unsecured and certain secured debt obligations to Long term debt due within one year and certain parent unsecured debt obligations to Liabilities subject to compromise on our consolidated balance sheet as of September 30, 2020. While this reclassification includes all of our debt, the Restructuring Support Agreement contemplates agreed-upon terms for a pre-arranged financial restructuring Plan that leaves unimpaired all holders of secured debt and subsidiary debt. Among other things, the Restructuring Support Agreement provides that holders of our secured debt will be entitled to receive cash interest payments and to have the principal amount of their indebtedness repaid or reinstated upon emergence and that holders of secured and unsecured debt of our subsidiaries will be entitled to receive cash interest payments and to have the principal amount of their indebtedness reinstated upon emergence.

Pursuant to Section 362 of the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed most actions against or on behalf of the Company Parties, including actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Company Parties’ property.

For information related to the Restructuring Support Agreement, the Chapter 11 Cases, the Plan and the DIP Financing, refer to Note 3.

The activity in our long-term debt is summarized as follows:



			For the nine months ended ‎September 30, 2020
			Principal						Interest Rate at
	January 1,		Payments				September 30,		September 30,
($ in millions)	2020		and Retirements		New Borrowings		2020		2020*

Secured debt issued by Frontier	$	5,711	$	(754)	$	-	$	4,957	7.77%
Unsecured debt issued by Frontier		10,949		-		-		10,949	9.20%
Secured debt issued by subsidiaries		106		-		-		106	8.37%
Unsecured debt issued by subsidiaries		750		-		-		750	6.90%
Debt prior to reclassification to
liabilities subject to compromise	$	17,516	$	(754)	$	-	$	16,762	8.67%

Less: Debt Issuance Costs		(168)						(65)
Less: Debt Discount		(46)						(47)
Debt, less unamortized debt
issuance costs and discounts		17,302						16,650
Less: Current Portion		(994)						(5,701)
Less: Debt subject to compromise		-						(10,949)
Total Long-term debt	$	16,308					$	-

* Interest rate includes amortization of debt issuance costs and debt discounts. The interest rates at September 30, 2020 represent a weighted average of multiple issuances.

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Additional information regarding our secured and unsecured long-term debt as of September 30, 2020 (prior to the filing of the Chapter 11 Cases) and December 31, 2019 is as follows:



	September 30, 2020			December 31, 2019

	Principal		Interest	Principal		Interest
($ in millions)	Outstanding		Rate	Outstanding		Rate

Secured debt issued by Frontier
Revolver due 2/27/2024 ⁽¹⁾	$	-		$	749	4.760% (Variable)
Term loan due 6/15/2024 ⁽²⁾		1,694	6.000% (Variable)		1,699	5.550% (Variable)
First lien notes due 4/1/2027		1,650	8.000%		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%
Secured debt issued by Frontier		4,957			5,711

Unsecured debt issued by Frontier
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%
Unsecured debt issued by Frontier		10,949			10,949

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%		6	6.154%
Secured debt issued by subsidiaries		106			106

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%
Unsecured debt issued by subsidiaries		750			750

Debt prior to reclassification to
liabilities subject to compromise		16,762	8.699% ⁽³⁾		17,516	8.486% ⁽³⁾
Less: debt subject to compromise		(10,949)			-
Total debt	$	5,813		$	17,516

⁽¹⁾ Represents borrowings under the JPM Credit Agreement Revolver, as defined below.

⁽²⁾ Represents borrowings under the JPM Credit Agreement Term Loan B, as defined below.

⁽³⁾ Interest rate represents a weighted average of the stated interest rates of multiple issuances.

New Debt Issuances

On August 28, 2020, the Company Parties filed the DIP Financing Motion with the Bankruptcy Court to approve the indentures, credit, guarantee and security documents governing the New First Lien Notes, the DIP Revolving Facility, the DIP Term Loan Facility, the Exit Revolving Facility, the Exit Term Loan Facility and, if applicable, the reinstated Term Loan B. On September 17, 2020, the Bankruptcy Court entered the final order approving the DIP Financing Motion.

On October 8, 2020, Frontier issued $1,150 million aggregate principal amount of New First Lien Notes and entered into a $625 million DIP Revolving Facility and a $500 million DIP Term Loan Facility. Frontier used the proceeds from the offering of the New First Lien Notes, together with the proceeds of the DIP Term Loan Facility, and cash on hand, to (i) repay in full the Company’s Original First Lien Notes and (ii) pay related interest, fees and expenses.

New First Lien Notes

On October 8, 2020, Frontier issued $1,150 million aggregate principal amount of New First Lien Notes. The New First Lien Notes were issued pursuant to an indenture, dated as of October 8, 2020 (the DIP Indenture), by and among Frontier, the guarantors party thereto, the grantor party thereto, JPMorgan Chase Bank N.A., as collateral agent and Wilmington Trust, National Association, as trustee. The New First Lien Notes were issued in a private offering exempt from the registration requirements of the Securities Act, to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under the Securities Act, at a purchase price equal to 100% of the principal amount thereof.

Prior to the conversion date, the New First Lien Notes are secured on a super-priority basis, subject to permitted liens and certain exceptions, by all the assets that secure Frontier’s obligations under the DIP Revolving Facility and the DIP Term Loan Facility, on a super-priority basis. From the conversion date, the New First Lien Notes are secured on a first-priority basis, subject to permitted liens and certain exceptions, by all the assets that secure Frontier’s obligations under its senior secured credit facilities on a first-priority basis.

The New First Lien Notes bear interest at a rate of 5.875% per annum and will mature on October 15, 2027. Interest on the New First Lien Notes is payable to holders of record semi-annually in arrears on April 15 and October 15 of each year, commencing April 15, 2021.

Frontier may redeem the New First Lien Notes at any time, in whole or in part, prior to their maturity. The redemption price for New First Lien Notes redeemed before October 15, 2023 will be equal to 100% of the aggregate principal amount thereof, together with any accrued and unpaid interest, if any, to, but not including, the redemption date, plus a make-whole premium. The redemption price for New First Lien Notes redeemed on or after October 15, 2023 will be equal to the redemption prices set forth in the DIP Indenture, together with any accrued and unpaid interest to the redemption date. In addition, at any time before October 15, 2023, Frontier may redeem up to 40% of the New First Lien Notes using the proceeds of certain equity offerings at a redemption price equal to 105.875% of the aggregate principal amount thereof, together with any accrued and unpaid interest, if any, to, but not including, the redemption date.

In the event of a change of control triggering event, each holder of New First Lien Notes will have the right to require Frontier to purchase for cash such holder’s New First Lien Notes at a purchase price equal to 101% of the principal amount of the New First Lien Notes, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The DIP Indenture contains customary negative covenants, subject to a number of important exceptions and qualifications, including, without limitation, covenants related to incurring additional debt and issuing preferred stock; incurring or creating liens; redeeming and/or prepaying certain debt; paying dividends on our stock or repurchasing stock; making certain investments; engaging in specified sales of assets; entering into transactions with affiliates; and engaging in consolidation, mergers and acquisitions. Certain of these

covenants will be suspended during such time, if any, that the New First Lien Notes have investment grade ratings by at least two of Moody’s, S&P or Fitch. The DIP Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the New First Lien Notes to become or to be declared due and payable.

DIP Term Loan Facility

On October 8, 2020, Frontier entered into a $500 million DIP Term Loan Facility, pursuant to the credit agreement, dated as of October 8, 2020 (the DIP to Exit Term Credit Agreement), by and among Frontier, as the borrower, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and each lender from time to time party thereto.

The DIP Term Loan Facility has a maturity of the earlier of (x) the date that is twelve months after the closing date of the DIP Term Loan Facility and (y) the date of the substantial consummation of the Plan; provided that to the extent such substantial consummation has not occurred on or prior to the date referred to in the foregoing clause (x), primarily because any condition precedent set forth therein with respect to the procurement of regulatory approvals has not been satisfied (and other than any other conditions that by their nature can only be satisfied on the consummation date), the maturity date shall be extended by an additional six months; provided that if certain conditions occur, the maturity date shall be the earlier of (a) the date that is the seventh anniversary of the closing date and (b) 90 days prior to the maturity date of the Second Lien Notes so long as the aggregate principal amount of such notes is in excess of a threshold amount.

At our election, the determination of interest rates for the DIP Term Loan Facility are based on margins over the alternate base rate or over LIBOR. The interest rate with respect to any LIBOR loan is 4.75% or 3.75% for alternate base rate loans, with a 1.00% LIBOR floor.

Subject to certain exceptions and thresholds, the security package under the DIP Term Loan Facility includes pledges of the equity interests in certain of our subsidiaries, which as of the issue date is limited to certain specified pledged entities, substantially all personal property of Frontier Video Services Inc., a Delaware corporation (Frontier Video), and, solely prior to the conversion date, substantially all of the unencumbered assets and properties (the DIP Collateral) of Frontier and Frontier Communications of Iowa, LLC, an Iowa limited liability company (Frontier Iowa), which such security interest in the DIP Collateral was granted solely pursuant to the DIP financing order issued by the Bankruptcy Court, which same assets also secure the New First Lien Notes. The DIP Term Loan Facility is guaranteed by the same subsidiaries that guarantee the New First Lien Notes. Upon the conversion date, the security package will no longer include the DIP Collateral.

The DIP Term Loan Facility includes usual and customary negative covenants for DIP to exit loan agreements of this type, including covenants limiting Frontier and its restricted subsidiaries’ (other than certain covenants therein which are limited to subsidiary guarantors) ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of certain material payment subordinated indebtedness, in each case subject to customary exceptions for exit loan agreements of this type.

The DIP Term Loan Facility also includes certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, certain events under ERISA, upon the conversion date, unstayed judgments in favor of a third party involving an aggregate liability in excess of a certain threshold, change of control, upon the conversion date, specified governmental actions having a material adverse effect or condemnation or damage to a material portion of the collateral.

Upon the conversion date, subject to certain conditions, the DIP Term Loan Facility shall convert into the Exit Term Loan Facility with an aggregate principal amount of $500 million.

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DIP Revolving Facility

On October 8, 2020, Frontier entered into the DIP Revolving Facility, pursuant to the senior secured superpriority debtor-in-possession credit agreement, dated as of October 8, 2020, by and among Frontier, as the borrower, Goldman Sachs Bank USA, as administrative agent and collateral agent and each lender and issuing bank from time to time party thereto.

The DIP Revolving Facility has a maturity of the earlier of (x) the date that is twelve months after the closing date of the DIP Revolving Facility and (y) the date of the substantial consummation of the Plan; provided that to the extent such substantial consummation has not occurred on or prior to the date referred to in the foregoing clause (x), primarily because any condition precedent set forth therein with respect to the procurement of regulatory approvals has not been satisfied (and other than any other conditions that by their nature can only be satisfied on the consummation date), the maturity date shall be extended by an additional six months.

At our election, the determination of interest rates for the DIP Revolving Facility is based on margins over the alternate base rate or over LIBOR. The interest rate with respect to any LIBOR loan is 3.25% (or 2.25% for alternate base rate loans).

Subject to customary exceptions and thresholds, the security package under the DIP Revolving Facility includes pledges of the equity interests in certain of our subsidiaries, which as of the issue date is limited to certain specified pledged entities, substantially all personal property of Frontier Video and substantially all of the unencumbered assets and properties of Frontier and Frontier Iowa, which such security interest in the unencumbered assets and properties was granted solely pursuant to the DIP financing order issued by the Bankruptcy Court, which same assets also secure the New First Lien Notes. The DIP Revolving Facility is guaranteed by the same subsidiaries that guarantee the New First Lien Notes. After giving effect to $90 million of letters of credit formerly outstanding under the Revolver that were rolled into, replaced or otherwise accommodated for under the DIP Revolving Facility, the Company has $535 million of available borrowing capacity under the DIP Revolving Facility.

The DIP Revolving Facility includes usual and customary negative covenants for loan agreements of this type, including covenants limiting Frontier and its restricted subsidiaries’ (other than certain covenants therein which are limited to subsidiary guarantors) ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of certain material payment subordinated indebtedness, in each case subject to customary exceptions for loan agreements of this type.

The DIP Revolving Facility also includes certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, certain events under ERISA, change of control or damage to a material portion of the collateral.

Upon the conversion date, subject to certain conditions, the DIP Revolving Facility shall convert into the Exit Revolving Facility with an aggregate principal amount of $625 million. The Exit Revolving Facility will be available on a revolving basis during the period commencing on the conversion date and ending on the date that is the earlier of (x) 3 years after the conversion date and (y) 91 days prior to the earliest maturity date of permitted pari passu refinancing debt, permitted junior refinancing debt, the term loans outstanding under the prepetition credit agreement after giving effect to the consummation of the Plan (or any indebtedness that replaces or refinances such term loans) and any long term exit facilities so long as, in each case, the outstanding principal amount of any such indebtedness is in excess of an amount set forth in the definitive documentation with respect to the Exit Revolving Facility. The determination of interest rates for the Exit Revolving Facility is based on margins over the alternate base rate or over LIBOR, at our election. The interest rate with respect to any LIBOR loan is 4.00% (or 3.00% for alternate base rate loans).

New Debt Reductions

On October 8, 2020, Frontier used the proceeds from the offering of New First Lien Notes, together with the proceeds of the DIP Term Loan Facility and cash on hand, to (i) repay in full the $1,650 million principal balance of the Original First Lien Notes, and (ii) pay related interest, fees and expenses incurred in connection therewith.

On September 17, 2020, Frontier repaid the $749 million of outstanding principal under the Revolver, plus accrued interest, using cash on hand. The repayment in full of all revolving loans outstanding under the JPM Credit Agreement was a condition precedent to the entry into the DIP Facility, and the Revolver was terminated on October 8, 2020 upon entry into the DIP Revolving Facility.

Existing Term Loan and Revolving Credit Facility

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 the $1,740 million Term Loan B maturing on June 15, 2024. In addition, Frontier had the $850 million Revolver which was repaid in full on September 17, 2020, as described herein. The maturity of the Term Loan B, 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 September 30, 2020, 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 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 Term Loan B are 2.75% for Base Rate borrowings and 3.75% for LIBOR borrowings. The security package under the JPM Credit Agreement includes pledges of the equity interests in certain Frontier subsidiaries and guarantees by certain Frontier subsidiaries.

On September 17, 2020, Frontier repaid the $749 million of outstanding principal under the Revolver, plus accrued interest, as described above under “New Debt Reductions.” and the Revolver was terminated on October 8, 2020 upon entry into the DIP Revolving Facility.

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 “Existing Debt Issuances and Reductions.”

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 “Existing Debt Issuances and Reductions.”

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Existing Debt Issuances and Reductions

For the nine months ended September 30, 2020, Frontier retired $754 million principal amount of senior secured debt. For the nine months ended September 30, 2019, Frontier retired $348 million principal amount of 7.125% senior unsecured notes due 2019 and $2,130 million of secured debt.

On March 15, 2019, Frontier completed a private offering of $1,650 million aggregate principal amount of the Original First Lien Notes. The Original First Lien Notes were repaid in full on October 8, 2020 with proceeds from the offering of the New First Lien Notes and the DIP Term Loan Facility and cash on hand.

Additionally, on March 15, 2019, Frontier used the proceeds from the offering of the Original 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.

During 2019, Frontier recorded a gain 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.