NEW YORK-Frontier Corp. of Rochester, N.Y., sold May 21 a $300 million debt issue of notes due 2004 priced at 99.996 percent of par, or face, value to yield 7.257 percent.
Salomon Brothers Inc., New York, was lead underwriter for the debt offering, for which the securities can be redeemed by the carrier prior to maturity.
The issue received investment grade ratings of A3 from Moody’s Investors Service Inc. and A from Standard & Poor’s Corp., both in New York. Just prior to the sale, Duff & Phelps Credit Rating Co., Chicago, lowered its investment grade rating to A- from A on the approximately $600 million of consolidated debt the telecommunications carrier had outstanding before the new issue.
Frontier, formerly known as Rochester Telephone Corp., is a holding company for the fifth largest long-distance services provider in the United States, with about 975,000 access lines at the end of 1996. The carrier focuses on selling bundled telecommunications services targeted at small and medium-size businesses.
Frontier also provides wireless services through two entities, according to the preliminary offering statement for the proposed note issue. In a joint venture with Bell Atlantic Nynex Mobile, Frontier is the manager of Upstate Cellular Network, which holds licenses in New York and Pennsylvania covering a population of 5.1 million. Frontier owns and manages other cellular properties covering 300,000 pops.
Proceeds of the $300 million note issue will help finance Frontier’s portion of a $2 billion nationwide fiber-optic network. Frontier is a partner with Qwest Communications in building the NEC SONET Transport Systems network to interconnect nearly 100 cities.
“Frontier’s downgrade reflects unexpected declines in the operating and financial performance of its long-distance segment, its plans to spend heavily to acquire capacity on a nationwide long-distance fiber-optic network and concerns about intensifying competition in its long-distance business,” said the Duff & Phelps report.
