Long-Term Debt | (10) Long-Term Debt: Chapter 11 RestructuringThe 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); andthe 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 were 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 four months ended April 30, 2021 and for the year ended December 31, 2020 recorded on our Predecessor statements of operations was lower than contractual interest of $450 million and $1,456 million, respectively, because we ceased accruing interest on the Petition Date in accordance with the terms of the Plan and ASC Topic 852. The activity in long-term debt is summarized as follows: ($ 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 security (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) Total Long-term debt, April 30, 2021 (Predecessor) $ 7,015 Principal debt outstanding, April 30, 2021 (Successor) $ 6,794 New borrowings 1,000 Repayment of long-term debt at maturity (17) Principal debt outstanding, December 31, 2021 (Successor) $ 7,777(2) Plus: Unamortized fair value adjustment 219 Less: Unamortized debt issuance costs (13) Less: Long-term debt due within one year (15) Long-term debt, December 31, 2021 (Successor) $ 7,968 (1)Upon emergence, Frontier adjusted the carrying value of our debt to fair value. 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 $18 million for the eight months ended December 31, 2021.(2)Weighted average interest rate as of December 31, 2021 was 5.702%. Interest rate includes amortization of debt issuance costs and debt discounts. The interest rate at December 31, 2021 represent a weighted average of multiple issuances. Additional information regarding our senior unsecured debt, senior secured debt, and subsidiary debt at December 31, 2021 and 2020 is as follows: Successor Predecessor December 31, 2021 December 31, 2020 Principal Interest Principal Interest ($ in millions) Outstanding Rate Outstanding Rate Secured debt issued by Frontier Term loan due 10/8/2027 $ 1,464 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 11/1/2029 750 5.875% - Second lien notes due 5/1/2029 1,000 6.750% 1,000 6.750% Second lien notes due 2030 1,000 6.000% - IDRB due 5/1/2030 13 6.200% 14 6.200% Total secured debt issued by Frontier 6,927 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% Total 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 - 6 6.154% Total secured debt issued by subsidiaries 100 106 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% Total unsecured debt issued by subsidiaries 750 750 Debt prior to reclassification to liabilities subject to compromise 7,777 5.702%(1) 16,769 8.188%(1) Less: debt subject to compromise - (10,949) Unamortized fair value adjustment 219 - Carrying amount of Total Debt $ 7,996 $ 5,820 (1) Interest rate represents a weighted average of the stated interest rates of multiple issuances Credit Facilities and Term Loans Credit AgreementsOn 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”). On April 14, 2021, Old Frontier entered into a Refinancing and Incremental Facility Amendment No. 2 (the “Refinancing and Incremental Amendment”), providing for, among other things, 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”). The New Incremental Commitment replaced the original incremental commitment, with certain of old Frontier’s noteholders and/or their affiliates. 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 $1,468 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 FacilityThe Term Loan Facility’s maturity date is October 8, 2027. At Frontier’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 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 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 FacilityThe $625 million Revolving Facility will be available on a revolving basis until April 30, 2025. At Frontier’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 approximately $96 million of letters of credit previously outstanding, Frontier has $529 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 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 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. On October 13, 2021, the Issuer entered into an amendment (the “Amendment”) to its senior secured credit facility. The Amendment, among other things, modifies the financial covenant from a maximum first lien leverage ratio covenant of 2.75:1.00 to a maximum first lien leverage ratio covenant of 3.00:1.00. Senior Secured Notes Second Lien Notes due 2030On October 13, 2021, New Frontier Issuer issued $1.0 billion aggregate principal amount of 6.000% Second Lien Secured Notes due 2030 (the “Second Lien Notes due 2030”) in an offering pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended. The Company intends to use the net proceeds of this offering to fund capital investments and operating costs arising from the Company’s fiber build and expansion of its fiber customer base, and for general corporate purposes. The Second Lien Notes due 2030 were issued pursuant to an indenture, dated as of October 13, 2021 (the “Second Lien 2030 Indenture”), by and among the Issuer, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, as trustee and as collateral agent. Second Lien Notes due May 2029In connection with the DIP financing, on November 25, 2020, Old Frontier issued $1.0 billion aggregate principal amount of 6.750% Second Lien Secured Notes due May 1, 2029 (the “Second Lien Notes due May 2029”). The Second Lien Notes due May 2029 were issued pursuant to an indenture, dated as of November 25, 2020 (the “Second Lien May 2029 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. On the Effective Date, in accordance with the Second Lien May 2029 Indenture and the Plan, New Frontier Issuer entered into a supplemental indenture with Wilmington Trust, National Association, as trustee, and assumed the obligations under the Second Lien Notes due May 2029 and the Second Lien May 2029 Indenture. Second Lien Notes due November 2029 or “Takeback Notes”On April 30, 2021, New Frontier Issuer issued $750 million aggregate principal amount of 5.875% Second Lien Secured Notes due November 2029 (the “Second Lien Notes due November 2029” or the “Takeback Notes”) pursuant to an indenture, dated as of April 30, 2021 (the “Takeback Notes Indenture”), by and among New Frontier Issuer, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, as trustee and as 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 Second Lien Notes due 2030, the Second Lien Notes due May 2029 and the Takeback Notes are collectively referred to as the Second Lien Notes. The Second Lien 2030 Indenture, the Second Lien May 2029 Indenture and the Takeback Notes Indenture are collectively referred to as the Second Lien Notes Indentures. The Second Lien Notes and the First Lien Notes (as defined below) are referred to herein collectively as the “Notes”. The Second Lien Notes are secured by a second-priority lien, subject to permitted liens, by all the assets that secure New Frontier Issuer’s obligations under the Term Loan Facility, the Revolving Facility, and the First Lien Notes (as defined below). The Second Lien Notes 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 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 Second Lien Notes have investment grade ratings by at least two of Moody’s, S&P or Fitch. The Second Lien Notes Indentures 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 Second Lien Notes to become or to be declared due and payable. First Lien NotesIn 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 2027”) and (b) on November 25, 2020, Old Frontier issued $1,550 million aggregate principal amount of 5.000% First Lien Secured Notes due May 1, 2028 (the “First Lien Notes due 2028” and, together with the First Lien Notes due 2027, the “First Lien Notes”). The First Lien Notes due 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 2028 were issued pursuant to an indenture, dated as of November 25, 2020 (the “2028 First Lien Indenture” and, together with the 2027 First Lien Indenture, the “First Lien Indentures”), 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. On the Effective Date, in accordance with the Indentures and the Plan, New Frontier Issuer entered into supplemental indentures to the First Lien Indentures with Wilmington Trust, National Association, as trustee, and assumed the obligations under each series of the First Lien Notes and each of the First Lien 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 the Term Loan Facility and the Revolving Facility. The First Lien 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. Certain of these covenants will be suspended during such time, if any, that the First Lien Notes have investment grade ratings by at least two of Moody’s, S&P or Fitch. The First Lien Notes Indentures 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 First Lien Notes to become or to be declared due and payable. Gain/Loss on Extinguishment of DebtDuring the year ended December 31, 2020, Frontier recorded a loss on early extinguishment of debt of $72 million driven primarily by the write-off of unamortized original issuance cost associated with the retired Term Loan B, the Original First Lien Notes, and the Original Second Lien Notes. During the year ended December 31, 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. Other ObligationsDuring 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 2019. 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 $54 million is included in our consolidated balance sheet within “Other liabilities” as of December 31, 2021 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 12 for additional details. |