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Frontier Communications Corporation Message Board

  • vjpj1110 vjpj1110 Mar 27, 2013 11:09 AM Flag

    Refinancing probaly at a higher intrest rate

    Looks like they're tendering for a good-sized hunk of existing shorter term debt and issuing longer term debt, probably with a higher interest rate, to pay for it. Similar to what they did last year.

    Sentiment: Hold

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    • With less of it they should have an upgrade on their outstanding debt if they buy enough of it back.

    • 7.625%! So much for the chest-pounding "know it alls" (aka know nothings) in this thread.

      Sentiment: Hold

    • Considering the ordinary interest rate on bonds, even for a company which might be considered "high yield" (the current ratings for Frontier by Moodys is BB2, which is not great but not quite to the "high yield" level), is currently 5.65% (according to CNN Money's listing of yield rates). These proposed bonds will be used to retire debt that is currently over 7% due in 2015--meaning that it is still considered long term debt for financial statement purposes). As such, this refinancing will save the company approximately 1.5% (or more) while neither increasing or decreasing the long term debt on the company's financial statement. Intelligent action, which will assist in increasing the bottom line.

      Sentiment: Hold

      • 3 Replies to leewardisl
      • swp3@sbcglobal.net swp3 Mar 27, 2013 3:34 PM Flag

        Disagree. Interest rate will probably be higher. Hoping you are right though

        Sentiment: Buy

      • 5.65% seems pretty optimistic to me considering they had to pay 7.125% last Aug and their credit seems shakier now than then... Fitch lowering their credit rating only a few days ago.

        Sentiment: Hold

      • "Considering the ordinary interest rate on bonds, even for a company which might be considered "high yield" (the current ratings for Frontier by Moodys is BB2, which is not great but not quite to the "high yield" level), is currently 5.65% (according to CNN Money's listing of yield rates). These proposed bonds will be used to retire debt that is currently over 7% due in 2015--meaning that it is still considered long term debt for financial statement purposes). As such, this refinancing will save the company approximately 1.5% (or more) while neither increasing or decreasing the long term debt on the company's financial statement. Intelligent action, which will assist in increasing the bottom line"

        Good points.

        But let's wait for the final results. If your conjecture that a 10 year FTR bond will bring in close to par received by FTR at a coupon of 5.65% proves accurate, then the call premium FTR will have to pay to redeem the existing debt will be big. A big call premium has to be booked as period interest expense and would make a big dent in FTR's Q2 GAAP earnings.

        So it's going to be a mixed bag. But it will for sure take pressure off Maggie.

    • "Looks like they're tendering for a good-sized hunk of existing shorter term debt and issuing longer term debt, probably with a higher interest rate, to pay for it. Similar to what they did last year"

      Very interesting, a push out of mandatory redemption's.

      I would expect some corporate cash to pay down a small amount of debt. That might deflect some criticism from cynics who will ask how this will help FTR reduce its leverage of EBITDA when it continues to trail revenue down as fixed costs remain the same or go higher while seasoned revenue runoff swamps new sales.

      So the results will tell the story. One thing for sure is that a refi takes pressure off management to pay off debt due within two years and push most of it out to debt due in 10 years.

      • 2 Replies to mr_dinky_dot_bomb
      • I don't know how you come off claiming they will pay a higher rate of interest on the new bonds. These folks are not idiots. They would not be calling the existing debt and issuing new debt if they were not expecting to lower the interest.

        As a bond holder in numerous non-investment grade bonds over the past 5 years, I have been experiencing an ever increasing rate of bonds being called in order to take advantage of the current low borrowing rates on new debt.. Just this month alone, I have had three bond issues called due to refinancing. In fact, the interest rates on non-investment grade debt, FTR is better than non-investment grade, is running around 5%. This is a drop from rates of 10 to 12% or more only 3 or 4 years ago. I no longer am buying any of these bonds because a yield of 5% is not acceptable to me.

      • If they save money on interest they can give Maggie a raise for saving the company money

 
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