Frontier Communications’ bankruptcy plan, which would eliminate $10 billion in debt in exchange for giving senior creditors an ownership stake in the company, has been approved by a U.S. bankruptcy court.
The U.S. bankruptcy court for the Southern District of New York approved the plan on Aug. 21 “subject to final documentation.” The reorganization still needs the approval of regulators in Connecticut and several other states.
CEO Bernie Han said the confirmation “marks the beginning of a new and exciting path forward at Frontier.”
“With a significantly stronger financial foundation, Frontier will be well positioned to accelerate our transformation, invest in infrastructure and drive efficiencies to better serve our customers,” Han said in a statement. “At a time when our network services have never been needed more, our entire team has remained steadfast in their commitment to serving our customers, ensuring they are connected and informed.”
Meanwhile, the union representing Frontier workers, including more than 2,000 in Connecticut, has raised concerns with the Federal Communications Commission that Frontier may decide to spin off its fiber, or high speed internet, assets under the restructuring.
The Communications Workers of America (CWA) and an advocacy group known as The Utility Reform Network (TURN) said in a press release last week that Frontier’s proposed “virtual separation” plan could split the company between areas that will receive investment in fiber and those that won’t.
The union is asking for clarification about the “meaning and potential effect” of the virtual separation proposal.
The union also raised concerns that a group of shareholders, including Elliot Management and Franklin Resources, have been closely coordinating during its negotiations with the company and could continue to exert control over decisions after the bankruptcy.
“The bankruptcy plan relieves Frontier of $10 billion in debt, a necessary step that will allow Frontier to make the investments needed to provide the service that its customers want and deserve,” the CWA said in a separate press release after the court decision. “However, there are still important outstanding questions regarding Frontier’s plans to follow through on badly-needed investments on broadband deployment and service quality.”
“CWA members are calling on state regulatory agencies and the Federal Communications Commission to thoroughly review Frontier’s plan in order to ensure that the interests of Frontier workers and customers will be served in the newly reorganized Frontier,” the statement said.
Frontier did not immediately respond to a request for comment on the union’s concerns.
Headquartered in Norwalk, Frontier provides phone, internet and video services in 25 states and houses its eastern region operations center in New Haven.
When it filed for Chapter 11 bankruptcy in April, Frontier submitted a pre-negotiated deal with 75 percent of its senior note holders that would swap more than $10 billion of its more than $17 billion worth of debt into common stock in a newly formed parent company called Frontier Communications Holdings.
Frontier has pledged to use the freed up cash to upgrade its fiber networks and improve service to customers. The company has acknowledged that its reliance on slower copper networks and its failure to invest in fiber over the years has contributed to its customer churn and financial losses.
In an investor presentation leading up to the bankruptcy, it outlined a plan to spend $1.4 billion on fiber upgrades and expansion through 2024, bringing fiber to about 3 million new households.
Because it provides landline telephone service, which is a state-regulated public utility, Connecticut’s Public Utilities Regulatory Authority (PURA) must sign off on the deal before Frontier can emerge from bankruptcy.
Frontier said it had secured regulatory approvals or “favorable determinations” in six of the states where it operates as of last week.
In June, PURA issued an interim decision saying it would not approve or deny Frontier’s plan because it was still subject to change as a result of the bankruptcy case. But the agency said Frontier could file a new petition with the agency when its restructuring plan was more concrete.
A spokeswoman for PURA said in an email Friday morning that the authority is scheduled to make a decision in early February.
