Frontier Downgraded by S&P
On 20 June 2019, Frontier Communications Corp (Frontier, Company) corporate family rating was downgraded by credit ratings agency S&P. The Company’s senior unsecured notes and senior secured notes were also downgraded.
The ratings downgrade was triggered by the addition of new directors, including Mohsin Y. Meghji and Robert A. Schriesheim, in the past six months with substantial restructuring experience. The recent additions to the Frontier’s board increase the likelihood the Company will consider a distressed debt exchange or file for Chapter 11 in the next 12 months. Holders of the Company’s unsecured bonds such as Apollo Global Management and Elliott Management Corp, have proposed swapping their unsecured debt into new secured notes.
Frontier has continued to face significant headwinds stemming from its acquisition of Verizon’s assets in California, Texas and Florida (CTF). Whilst the Company has the ability to address near-term maturities, through cash flow and sale of wireless assets, the main concern is USD2.6bn maturing in 2022. The Company has limited access to secured and unsecured debt markets, high leverage and insufficient cash flow to address these maturities, and potential restructuring or Chapter 11 could alleviate concerns from unsecured creditors.
Peabody Energy Corporation Announces Joint Venture
On 19 June 2019, Peabody Energy Corporation (Peabody, Company) announced that it had entered into a definitive agreement to combine the company's Powder River Basin and Colorado assets with Arch Coal Inc Arch). The joint venture is aimed at strengthening the competitiveness of coal against natural gas and renewables and is expected to generate average synergies of approximately USD120m annually over its initial 10 year term. The joint venture ownership will be 66.5% Peabody and 33.5% Arch with Peabody to serve as the operator.
Peabody and Arch will continue to operate the assets independently until closing of the transaction. Upon closing, Peabody and Arch will each contribute its active Powder River Basin and Colorado mines, as well as related assets and liabilities, into the joint venture. We note that the closing of the transaction is subject to regulatory approval and satisfaction of certain closing conditions.