Frontier Communications Parent (FYBR) 8-KEntry into a Material Definitive Agreement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):   August 8, 2023

Frontier Communications Parent, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

(203) 614-5600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

General

On August 8, 2023 (the “Closing Date”), Frontier Issuer LLC (the “Issuer”), a limited-purpose, bankruptcy remote, wholly owned indirect subsidiary of Frontier Communications Parent, Inc. (the “Company”), completed the previously announced financing transaction by issuing $1.586 billion aggregate principal amount of secured fiber network revenue term notes, consisting of $1.119 billion 6.60% Series 2023-1, Class A-2 term notes, $155 million 8.30% Series 2023-1, Class B term notes and $312 million 11.50% Series 2023-1, Class C term notes (collectively, the “Notes”), each with an anticipated term ending in July 2028 (such anticipated repayment date, the “ARD”), in an offering exempt from registration under the Securities Act of 1933, as amended.

The Notes were issued pursuant to an indenture, dated as of August 8, 2023 (the “Base Indenture”), as supplemented by the Series 2023-1 Supplement thereto, dated as of August 8, 2023 (the “Series 2023-1 Supplement”), in each case entered into by and among the Issuer, Frontier Dallas TX Fiber 1 LLC (“AssetCo”) and Citibank, N.A. as the indenture trustee (the “Trustee”).

 

The Base Indenture allows the Issuer to issue additional series of notes subject to certain conditions set forth therein, and the Base Indenture, together with the Series 2023-1 Supplement, and any other series supplements to the Base Indenture, is referred to herein as the “Indenture.”

The Notes were issued as part of a securitization transaction, pursuant to which the Company’s fiber network assets and associated customer contracts in certain neighborhoods in the Dallas metropolitan area were contributed to AssetCo, a direct, wholly-owned subsidiary of the Issuer.

Each of the Issuer, AssetCo and any additional asset entities party to the Base Indenture from time to time (such persons, collectively, the “Obligors,”), Frontier SPE Guarantor LLC, the guarantor of the Notes (the “Guarantor”) and Frontier Communications Holdings, LLC, as manager, entered into a management agreement dated August 8, 2023 (the “Management Agreement”). Frontier Communications Holdings, LLC acts as the manager with respect to the assets of the Obligors (such assets, the “Securitized Assets”). The primary responsibilities of the manager are to perform certain operational and administrative functions on behalf of the Obligors with respect to the Securitized Assets pursuant to the Management Agreement.

 

Notes

 

While the Notes are outstanding, scheduled payments of interest are required to be made on the Notes on a monthly basis. From and after the ARD, principal payments will also be required to be made on the Notes on a monthly basis. No principal payments will be due on the Notes prior to the ARD, unless certain rapid amortization or acceleration triggers are activated.

 

The legal final maturity date of the Notes is in August of 2053. If the Issuer has not repaid or refinanced any Note prior to the monthly payment date in July of 2028, additional interest will accrue thereon in an amount equal to the greater of (i) 5.00% per annum and (ii) the excess amount, if any, by which the sum of the following exceeds the interest rate for such Note: (A) the yield to maturity (adjusted to a “mortgage-equivalent basis” pursuant to the standards and practices of the Securities Industry and Financial Markets Association) on the ARD for such Note of the United States Treasury Security having a remaining term closest to 10 years plus (B) 5.00% plus (C) the post-ARD note spread applicable to such Note.

Collateral and Guarantee

 

The Notes are obligations only of the Obligors pursuant to the Indenture. The Notes are secured by a security interest in substantially all of the Securitized Assets pursuant to the Indenture, and guaranteed by the Guarantor pursuant to the Guarantee and Security Agreement, dated August 8, 2023 (the “Guarantee and Security Agreement”) by the Guarantor in favor of the Trustee, which guarantee is secured by a security interest in substantially all of the assets of the Guarantor. Except as described below, neither the Company nor any subsidiary of the Company, other than the Obligors and the Guarantor, will guarantee or in any way be liable for the obligations of the Obligors under the Indenture or the Notes.

 

Covenants and Restrictions

 

The Notes are subject to a series of covenants and restrictions customary for transactions of this type. These covenants and restrictions include (i) that the Issuer maintains a liquidity reserve account to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments, including specified make-whole payments in the case of certain optional prepayments of the Notes prior to the monthly payment date in July 2026, (iii) certain indemnification payments in the event, among other things, that  the transfers of the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. As provided in the Base Indenture, the Notes are also subject to rapid amortization in the event of a failure to maintain a stated debt service coverage ratio. A rapid amortization may be cured if the debt service coverage ratio exceeds a certain threshold for a certain period of time, upon which cure, regular amortization, if any, will resume. The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.

 

Use of Proceeds

The Company plans to use the proceeds from the offering of the Notes to, among other things, defease certain existing indebtedness, including bonds held by Frontier Southwest Incorporated, and for general corporate purposes, including potential investments or expenditures, such as capital expenditures and research and development, in line with the Company’s fiber expansion and copper migration strategies.

 

The foregoing summaries do not purport to be complete and are subject to, and qualified in their entirety by reference to, the complete copies of the Base Indenture and the Series 2023-1 Supplement, which are filed as Exhibits 4.1 and 4.2 hereto, respectively.

The information set forth in Item 1.01 is incorporated by reference into this Item 2.03.

 

(d)          Exhibits

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.