FTR is giving away 398 million bucks, and they have 500 million in debt due next year ? Why. why would they do that? I guess they figure they can afford that amount, but could no longer afford to give away 746 million. They will use the new found 348 million they are no longer giving away for debt. They must be in big trouble giving away almost 400 million bucks.
To all those supposed bankruptcy experts who all of a sudden showed up, ask yourself this, would a company teetering on the brink give away about 400 million dollars ? That is the current dividend, and near the amount owed on 2013 debt. One would think they would have cut the divi to zero if they were in panic over debt. They are not.
Current 2012 debt = 0, and by year end, 2013 debt = 0
By year end 2013, 2014 debt will = 0.
Expect to hear about 2015 refi shortly, it is all but in the works, that is part of the reason for the recent divi cut.
The bond market liked the divi cut even if we didn't, and with the cut, and greater financial flexibility, they can eliminate whichever debt is the most expensive.
Short term pain, but the right move. Revenue loss slowed down to 8 million, business revenue grew by 10 million. The business side will lead the turn around. Metro E is just out of the gate, and hit the ground running as reported in the most recent q.
Keep in mind they still lost customers, both residential and business during the year. The business revenue started the year at 587 million and ended the year at 591, a net gain. The revenue per business customer started the year at five hundred sixty one, and ended the year at 627 per. A net gain of 66 dollars per customer as they bought an expanded product package. This is the start, Metro E is brand new.
<m.swanger> p.s. FTR "div & split history" page is not yet up to date for 2011 - it shows breakdown (ordinary/qualified div & Non-div distribution) for 2009 &2010, and div history clear back to 1956, but 2011 is not yet complete.....
BTW - My FTR is in regular taxable acct, not tax-deferred, so not sure how that is effected, or if ROC has any effect on div from stock held as part of an ETF (not a tax expert here).....
i forget the % .. but at least 50% of the 75 cent payout
was a return of capital .. the finances were set up to
allow this delivery for 2 years . so they really only
get the next 2 quarters of that "savings" they are not
generating enough revenue to cover everything ...
i'd say that another cut is coming , probably in the
3rd quarters .... lots of shorts feel the same way ,
or they would have been covering after the news ...
When a company has extremely high depreciation expenses, those expenses affect net income, they do not affect the amount of cash available to the company. When a company distributes more than its net income, the excess portion of the distribution is considered return of capital.
Shorts did not bother to cover Alsk until the past two days about 6 weeks after they announced their divi cut.
We will see over the next couple of quarters, but the demise of FTR revenue might be over stated. They slowed it down greatly, and went from losing six million in business revenue q2 to q3, to growing revenue by 10 million. The total revenue decline was 8 million last quarter. FCF over a billion for the year.
That business revenue gain was with an infant metro E, and barely 12 weeks of availability and a brand new sales force. Revenue is at the inflection point, will stay flat or grow starting this quarter. FTR is not in the dire straights some try to point to.
With the divi cut, financing on more favorable terms will happen, and happen during the first half of the year. If it doesn't, they have over 300m cash on hand, and will save over 300 million in divi payments, and eliminate 2013 debt this year.
Shorts all have their ideas, when revenue turns up, they will rethink their situation, not until. That is exactly what happened at Alsk, revenue growth, the short thesis there has changed. The BK hoped for evaporated.
Completely agree with you, that would really scare the shorts.
This is all hypothetical but, recently Goldman Sachs recommended for Verizon to sell off rest of their landlines assets.
For this to happen Frontier stock will move up quite a bit and show very positive results within the next nine months.
So Verizon can acquire fair market value for their assets. imho