Long-Term Debt

6 Months Ended

Jun. 30, 2021

(11) Long-Term Debt:

Chapter 11 Restructuring

The filing of the Chapter 11 Cases constituted an event of default that accelerated substantially all then-outstanding obligations under Old Frontier’s debt agreements and notes as follows:

the amended and restated credit agreement, dated as of February 27, 2017 (as amended, the JPM Credit Agreement),

the 8.000% first lien secured notes due April 1, 2027 (the Original First Lien Notes),

the 8.500% second lien secured notes due April 1, 2026 (the Original Second Lien Notes),

the unsecured notes and debentures and the secured and unsecured debentures of the Company’s subsidiaries.

As of the Effective Date, amounts that were outstanding under the JPM Credit Agreement, the Original First Lien Notes, and the Original Second Lien Notes have been repaid in full.

On the Effective Date, pursuant to the terms of the Plan, all of the obligations under Old Frontier’s unsecured senior note indentures were cancelled, and in connection with emergence, Frontier issued 244,401,000 shares of common stock that were transferred to holders of the allowed senior notes claims (as defined under the Plan).

Interest expense for the one and four months ended April 30, 2021 recorded on our Predecessor statements of operations was lower than contractual interest of $112 million and $450 million, respectively, because we ceased accruing interest on the Petition Date in accordance with the terms of the Plan and ASC Topic 852.

Interest expense for the three and six months ended June 30, 2020 recorded on our Predecessor statements of operations was lower than contractual interest of $372 million and $744 million, respectively, because we ceased accruing interest on the Petition Date in accordance with the terms of the Plan and ASC Topic 852.

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


($ in millions)
Principal debt outstanding, December 31, 2020 (Predecessor)	$	16,769
Issuance of incremental term loan		225
Issuance of Takeback Notes		750
Conversion of Unsecured Senior Notes		(10,949)
Repayment of long term subsidiary debt at maturity		(1)
Principal debt outstanding, April 30, 2021 (Predecessor)		6,794
Less: Unamortized debt issuance costs		(2)
Less: Unamortized premium (discount)		(39)
Less: Long-term debt due within one year		(15)
Carrying amount of debt, April 30, 2021 (Predecessor)		6,738
Fresh start accounting fair value adjustment		277	⁽¹⁾
Long-term debt, April 30, 2021 (Predecessor)	$	7,015


Principal debt outstanding, April 30, 2021 (Successor)	$	6,794
Repayment of long term debt at maturity		(4)
Principal debt outstanding, June 30, 2021 (Successor)		6,790	⁽²⁾
Less: Unamortized fair value adjustment		232
Less: Long-term debt due within one year		(15)
Long-term debt, June 30, 2021 (Successor)	$	7,007

⁽¹⁾Upon emergence, Frontier adjusted the carrying value of our debt to fair value, in accordance with ASC 852. The adjustment consisted of the elimination of the existing unamortized debt issuance costs and unamortized discounts and recording a balance of $236 million as a fair value adjustment. The fair value accounting adjustment is being amortized into interest expense using the effective interest method. This amortization resulted in $4 million for the two months ended June 30, 2021.

⁽²⁾Weighted average interest rate as of June 30, 2021 was 5.657%. Interest rate includes amortization of debt issuance costs and debt discounts. The interest rate at June 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 June 30, 2021 and December 31, 2020 is as follows:


	Successor			Predecessor
	June 30, 2021			December 31, 2020

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

Secured debt issued by Frontier
Term loan due 10/8/2027	$	1,471	4.500% (Variable)	$	1,250	5.750% (Variable)
First lien notes due 10/15/2027		1,150	5.875%		1,150	5.875%
First lien notes due 5/1/2028		1,550	5.000%		1,550	5.000%
Second lien notes due 5/1/2029		1,000	6.750%		1,000	6.750%
Takeback notes due 11/1/2029		750	5.875%		-
IDRB due 5/1/2030		14	6.200%		14	6.200%
Secured debt issued by Frontier		5,935			4,964

Unsecured debt issued by Frontier
Senior notes due 4/15/2020		-			172	8.500%
Senior notes due 9/15/2020		-			55	8.875%
Senior notes due 7/1/2021		-			89	9.250%
Senior notes due 9/15/2021		-			220	6.250%
Senior notes due 4/15/2022		-			500	8.750%
Senior notes due 9/15/2022		-			2,188	10.500%
Senior notes due 1/15/2023		-			850	7.125%
Senior notes due 4/15/2024		-			750	7.625%
Senior notes due 1/15/2025		-			775	6.875%
Senior notes due 9/15/2025		-			3,600	11.000%
Debentures due 11/1/2025		-			138	7.000%
Debentures due 8/15/2026		-			2	6.800%
Senior notes due 1/15/2027		-			346	7.875%
Senior notes due 8/15/2031		-			945	9.000%
Debentures due 10/1/2034		-			1	7.680%
Debentures due 7/1/2035		-			125	7.450%
Debentures due 10/1/2046		-			193	7.050%
Unsecured debt issued by Frontier		-			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		5	6.154%		6	6.154%
Secured debt issued by subsidiaries		105			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		6,790	5.657% ⁽¹⁾		16,769	8.188% ⁽¹⁾
Less: debt subject to compromise		-			(10,949)
Unamortized fair value adjustment		232			-
Carrying amount of Total debt	$	7,022		$	5,820

⁽¹⁾ Interest rate represents a weighted average of the stated interest rates of multiple issuances.

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Credit Facilities and Term Loans

Credit Agreements

As previously disclosed, on October 8, 2020, Old Frontier entered into that certain Credit Agreement with JPMorgan Chase Bank, N.A. (“JPM”), as administrative agent and collateral agent, and each lender from time to time party thereto (the “DIP to Exit Term Credit Agreement”), which provided for a senior secured superpriority DIP term loan facility in the aggregate principal amount of $500 million (the “Initial DIP Term Loan Facility”). On November 25, 2020, Old Frontier entered into an incremental amendment to the DIP to Exit Term Credit Agreement (the “Incremental DIP Term Loan Amendment”), which provided for an additional senior secured superpriority DIP term loan facility in the aggregate principal amount of $750 million (the “Incremental DIP Term Loan Facility” and, together with the Initial DIP Term Loan Facility, the “DIP Term Loan Facility”), and on April 14, 2021, Old Frontier entered into a Refinancing and Incremental Facility Amendment No. 2 (the “Refinancing and Incremental Amendment”), providing for (i) an amendment to the DIP to Exit Term Credit Agreement, pursuant to which the DIP Term Loan Facility was repriced from an interest rate margin of 4.75% for LIBOR loans or 3.75% for alternate base rate loans, with a 1.00% LIBOR floor, to an interest rate margin of 3.75% for LIBOR loans or 2.75% for alternate base rate loans, with a 0.75% LIBOR floor, effective on April 14, 2021 and (ii) an amendment to the Amended and Restated Credit Agreement (as defined below) providing for the New Incremental Commitment (as defined below).

On October 8, 2020, Old Frontier also entered into the debtor-in-possession revolving facility (the “DIP Revolving Facility”), pursuant to the Senior Secured Superpriority Debtor-In-Possession Credit Agreement, dated as of October 8, 2020, by and among Old Frontier, as the borrower and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, Goldman Sachs Bank USA, as administrative agent, JPM, as collateral agent and each lender and issuing bank from time to time party thereto (the “DIP to Exit Revolving Credit Agreement”).

Pursuant to the Refinancing and Incremental Amendment, JPM agreed to provide, subject to certain conditions, including emergence from the Chapter 11 Cases, an incremental exit term loan facility in an aggregate principal amount of $225 million (the “New Incremental Commitment”). As previously disclosed, Old Frontier and certain of its subsidiaries had previously entered into a commitment letter with certain existing noteholders and/or their affiliates (the “Original Commitment Parties”) pursuant to which, and subject to the satisfaction of certain conditions, including the Debtors’ emergence from the Chapter 11 Cases, the Original Commitment Parties agreed to provide an incremental term loan facility in an aggregate principal amount of $225 million (the “Original Incremental Commitment”). The New Incremental Commitment has been used in place of the Original Incremental Commitment, which was terminated on April 14, 2021.

In connection with the emergence from the Chapter 11 Cases, on the Effective Date, Frontier Communications Holdings, LLC, a Delaware limited liability company and indirect subsidiary of the Company (the “Borrower” or the “New Frontier Issuer”, as the case may be) entered into that certain Amended and Restated Credit Agreement with JPM, as administrative agent and collateral agent, Goldman Sachs Bank USA, as revolver agent, and each lender from time to time party thereto (the “Amended and Restated Credit Agreement”) to amend and restate the DIP to Exit Term Credit Agreement to, among other things, incorporate the DIP Revolving Facility from the DIP to Exit Revolving Credit Agreement, which incorporation resulted in the termination of the DIP to Exit Revolving Credit Agreement. Pursuant to the Amended and Restated Credit Agreement, the DIP Term Loan Facility was converted into an exit term loan facility in an aggregate principal amount of $1,475 million after giving effect to the New Incremental Commitment (the “Term Loan Facility”) and the DIP Revolving Facility converted into an exit revolving facility in the aggregate principal amount of $625 million (the “Revolving Facility”) and became subject to the Amended and Restated Credit Agreement.

Term Loan Facility

The Term Loan Facility’s maturity date is October 8, 2027. At the Borrower’s election, the determination of interest rates for the Term Loan Facility is based on margins over the alternate base rate or over LIBOR. The interest rate margin with respect to any LIBOR loan under the Term Loan Facility is 3.75% for LIBOR loans or 2.75% with respect to any alternate base rate loan, with a 0.75% LIBOR floor.

Subject to certain exceptions and thresholds, the security package under the 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 and substantially all personal property of Frontier Video Services Inc., a Delaware corporation (“Frontier Video”), which same assets also secure the First Lien Notes (as defined below). The Term Loan Facility is guaranteed by the same subsidiaries that guarantee the First Lien Notes.

The Term Loan Facility includes customary negative covenants for loan agreements of this type, including covenants limiting the Borrower 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 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.

Revolving Facility

The $625 million Revolving Facility will be available on a revolving basis until April 30, 2025.

At the Borrower’s election, the determination of interest rates for the Revolving Facility is based on margins over the alternate base rate or over LIBOR. The interest rate margin with respect to any LIBOR loan under the Exit Revolving Facility is 3.50% or 2.50% with respect to any alternate base rate loans, with a 0% LIBOR floor.

Subject to customary exceptions and thresholds, the security package under the 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 and substantially all personal property of Frontier Video, which same assets also secure the First Lien Notes. The Revolving Facility is guaranteed by the same subsidiaries that guarantee the First Lien Notes. After giving effect to $90 million of letters of credit previously outstanding, the Borrower has $535 million of available borrowing capacity under the Revolving Facility.

The Revolving Facility includes customary negative covenants for loan agreements of this type, including covenants limiting the Borrower 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 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.

Secured Notes and Takeback Notes

Takeback Notes

On April 30, 2021, the New Frontier Issuer issued $750 million aggregate principal amount of 5.875% Second Lien Secured Notes (the “Takeback Notes”) pursuant to an indenture, dated as of April 30, 2021 (the “Takeback Notes Indenture”), by and among the New Frontier Issuer, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, a national banking association, as trustee (in such capacity, the “Trustee”) and as collateral agent (in such capacity, the “Collateral Agent”). At Old Frontier’s direction, the Takeback Notes were issued to holders of claims arising under, derived from, based on, or related to the unsecured notes issued by Old Frontier in partial satisfaction of such claims. The Takeback Notes are secured by a second-priority lien, subject to permitted liens, by all the assets that secure the New Frontier Issuer’s obligations under the Term Loan Facility, the Revolving Facility and the Notes (as defined below). The Takeback Notes bear interest at a rate of 5.875% per annum and will mature on November 1, 2029. Interest on the Takeback Notes will be payable to holders of record semi-annually in arrears on May 1 and November 1 of each year, commencing November 1, 2021.

The New Frontier Issuer may redeem the Takeback Notes at any time, in whole or in part, prior to their maturity. The redemption price for Takeback Notes redeemed before November 1, 2024 will be equal to 100% of the aggregate principal amount of such series being redeemed, together with any accrued and unpaid interest, if any, to, but not including, the redemption date, plus the applicable make-whole premium. The redemption price for Takeback Notes redeemed on or after November 1, 2024 will be equal to the redemption prices set forth in the Takeback Notes Indenture, together with any accrued and unpaid interest to the redemption date. At any time before April 1, 2024, the New Frontier Issuer may redeem up to 40% of the Takeback 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 Takeback Notes will have the right to require the New Frontier Issuer to purchase for cash such holder’s Takeback Notes at a purchase price equal to 101% of the principal amount of the applicable series of Takeback Notes, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The Takeback Notes 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 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 Takeback Notes have investment grade ratings by at least two of Moody’s, S&P or Fitch. The Takeback Notes 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 Takeback Notes to become or to be declared due and payable.

First and Second Lien Notes

In connection with the DIP financing, (a) on October 8, 2020, Old Frontier issued $1,150 million aggregate principal amount of 5.875% First Lien Secured Notes due October 15, 2027 (the “First Lien Notes due October 2027”) and (b) on November 25, 2020, Old Frontier issued (i) $1,550 million aggregate principal amount of 5.000% First Lien Secured Notes due May 1, 2028 (the “First Lien Notes due May 2028” and, together with the First Lien Notes due October 2027, the “First Lien Notes”) and (ii) $1,000 million aggregate principal amount of 6.750% Second Lien Secured Notes due May 1, 2029 (the “Second Lien Notes” and, together with the First Lien Notes, the “Notes”).

The First Lien Notes due October 2027 were issued pursuant to an indenture, dated as of October 8, 2020 (the “2027 First Lien Indenture”), by and among Old 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 First Lien Notes due May 2028 were issued pursuant to an indenture, dated as of November 25, 2020 (the “2028 First Lien Indenture”), by and among Old 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 Second Lien Notes were issued pursuant to an indenture, dated as of November 25, 2020 (the “Second Lien Indenture” and, together with the 2027 First Lien Indenture and the 2028 First Lien Indenture, the “Indentures” and each an “Indenture”), by and among Old Frontier, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, as trustee and as collateral agent.

These indentures contain 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.

On the Effective Date, in accordance with the Indentures and the Plan, the New Frontier Issuer entered into supplemental indentures (the “Supplemental Indentures”), in each case with Wilmington Trust, National Association, as trustee, and assumed the obligations under each series of the Notes and each of the Indentures.

The First Lien Notes are secured on a first-priority basis and pari passu with its senior secured credit facilities, 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 and pari passu with its senior secured credit facilities.

The Second Lien Notes are secured second-priority basis junior to the senior secured credit facilities and the First Lien Notes, subject to permitted liens and certain exceptions, by all the assets that secure Frontier’s obligations under its senior secured credit facilities and First Lien Notes on a second-priority basis junior to its secured credit facilities and First Lien Notes.