Fitch Ratings said it has placed Frontier Communications’ long-term debt on a “rating watch negative,” following the wireline provider’s announcement that it intends to pay $10.5 billion for Verizon operations in California, Texas and Florida.
Fitch’s announcement means that there’s at least a 50 percent chance it will downgrade Frontier’s credit rating, which at ‘BB.’
Frontier plans to finance the Verizon deal mostly with debt and equity.
Fitch said it would keep its rating for Frontier if the company’s debt-to-equity leverage remains below four after the transaction. If it’s higher Fitch said it could downgrade the rating.
The result will depend on how much equity Frontier issues in the transaction, how much cost savings it can achieve, and competitive pressures, Fitch said.
Frontier paid $2 billion for AT&T’s Connecticut wireline operation last year.
