From a follow-up post I just posted to the SA ... something like..."Frontier Cleans House":
"S&P's downgrade to BB- is ironic coming a couple of days after FTR's PR about paying down about $507 mil of 6.25% notes that matured. In that PR the new CFO called frontier, "opportunistic".
What that PR didn't mention is that FTR took up long term debt by about $587 mil in Q3 2012 at a higher rate than the matured debt. They really didn't pay down debt. FTR did a slow motion refinance without reducing leverage. So the debt pay down PR was at best self-serving if not deceitful in calling FTR "opportunistic". FTR was able to sell notes because the existing dividend is the safety valve. FTR's debt is a reasonable risk, but not the stock.
FTR's union pension and non-union retirement accounts are under funded about $927.8 mil based on stated assumptions as of 12/31/11 -- the actual performance of the union fund was about 1.5% while the long term fund performance assumed for 2011 and beyond was 8%. Obviously a growing gap which in reality is a bigger gap.
If I were negotiating a contract with FTR on behalf of a union I would ask why pension and retirement funding lags while executive comp surged thru 2011 on a 90% of max bonus payout. And why the non-union retirement funding is so much lower with a much larger under funded % than even the union pension account under funding. Since odds are that FTR executives have every intention of eventually collecting their contractual retirement benefits from FTR, why is the non-union retirement account so woefully under funded? At 12/31/11 FTR shows a non-union future benefit obligation of about $391.6 mil but assets of only $5.1 mil for a huge gap of $386.5 mil. While that $386.5 has been recognized on FTR's balance sheet as "other liabilities" it will still need to be funded eventually. The big questions are when & how? The gap for the union pension is $541.3 mil under funded at 12/31/11 -- on estimated future obligations of about $1,799.3 mil compared to asset value in the fund at "fair value" of $1,258 mil. And while the gap of $541.3 mil has also been recognized on FTR's balance sheet the same questions apply. I think it's also important for investors to consider that the actual performance of fund assets are currently well below the return assumptions that give rise to these estimates and stated gaps.
You can find an analysis of pension & non-union retirement accounts on several pages around " F 29" in FTR's 2011 10k available on FTR's site. FTR has an excellent Investor Relations section of its site."
Stuff your pension #$%$ - Frontier's prospects, according to S&P, are constrained by a combination of tough wireline competition and the trend away from wireline toward wireless communication. The third quarter saw Frontier take a 3% hit in revenue and a 5% decline in EBITDA over the same period last year caused by annual access line losses of around 8%.
What FTR needs to do is cut expenses and provide more and better services to stem line loss. The "local engagemnet" model does not seem to be working out so well.
"Stuff your pension #$%$ - Frontier's prospects, according to S&P, are constrained by a combination of tough wireline competition and the trend away from wireline toward wireless communication."
Below find the text of S&P's Press Release on 2/17/12 the day after the dividend cut from $.75 to $.40 -- note the warning from S&P cites competition from cable companies such as TWC & Comcast. So get a clue dopey -- FTR grew broadband about 1.5% Q over Q last report. It's not going to find a couple of $ bil laying around to fund its pensions, eh? You got an attitude for a bag holder -- you post like sage...
"Feb 17, 2012 11:08am EST
Feb 17 - Standard & Poor's Ratings Services said today that its
ratings and outlook on Stamford, Conn.-based incumbent local exchange carrier
Frontier Communications Corp. (BB/Negative/--) are not immediately
affected by the company's announcement that it reduced its annual dividend to
$0.40 per share from $0.75 per share. While we estimate that the dividend
reduction will conserve about $350 million of cash per year, our negative
outlook reflects our expectation that revenue and EBITDA will decline in the
near term. As a result, we revised our business risk profile on the company to
"weak" from "fair" (as defined by our criteria). During the fourth quarter of
2011, total revenue fell 6% year over year, due to fewer access lines and lower
subsidy revenue. While EBITDA was essentially flat compared with the prior-year
period and was better than our expectations, we do not believe this is a
sustainable near-term trend given the challenges of improving operating
performance in the legacy Verizon markets.
The ratings on Frontier reflect significant competition from the incumbent
cable operators, which are bundling telephone with high-speed data (HSD) and
video services and increasingly targeting smaller business customers, as well
as from wireless substitution. Other business risk factors include our
expectation for declining revenue from federal and state subsidies and the
possibility of integration challenges and weak operating performance in the
acquired Verizon properties. Tempering factors include the company's solid
position as an incumbent in its territories, healthy EBITDA margins, and
solid-albeit declining--free operating cash flow, and modest growth in HSD
Primary Credit Analyst: Allyn Arden, CFA, New York (1) 212-438-7832;
Secondary Contact: Catherine Cosentino, New York (1) 212-438-7828;