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Frontier Communications to Sell $2.8B of Junk Bonds as Part of Bankruptcy Exit

Investors Who Were Sold Telecommunication Company’s Bonds Grapple with Losses 

In its second sale in two months, Frontier Communications Corp. wants to sell $2.8B in junk bonds to help pay for its exit from bankruptcy. 

According to sources that spoke with Bloomberg, this includes new $1.8B first-lien bonds at an about 5.25% yield and another $1B of second-lien notes at a 7 – 7.25% yield. The new bonds, along with an increase to an existing term loan, are meant to allow Frontier to pay back debt it owes that will mature in 2024 and 2026.

The telecommunications company, which provides TV, Internet, and phone services in 29 states, filed for bankruptcy protection in April in the wake of its $17B of debt. NASDAQ delisted it soon after. In August, a bankruptcy court approved Frontier Communication’s plan to cut over $10B of debt as part of its restructuring plan. The company sold $1.6B of debt in October.

Meanwhile, Frontier Communications investors have been left grappling with how to recover the losses they suffered because they invested in this company’s junk bonds at the recommendation of their broker. For instance, FMSbonds, formerly called First Miami Securities, issued millions of Frontier Communications bonds and sold them to customers.

All over the US, our investment fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) are here to help you recoup the losses you suffered from purchasing Frontier Communication bonds at the encouragement of your financial advisor. Contact us today.

Brokers May Not Have Fully Disclosed the Risks Involving Frontier Communications 

Originally called Citizens Communications Company, and then later Citizens Utility Company, Frontier Communications bonds were sold mostly to institutional investors, including Franklin Resources, Elliott Management Group, and Gold Tree Asset Management. However, Frontier Communications bonds were also sold to retail investors, including retirees. 

Most Frontier Communications bondholders are likely holding unsecured debt. 

Now, investors are saying they were never fully apprised of the financial and business problems that Frontier Communications was having leading up to its bankruptcy nor were the risks involved fully disclosed to them. This would be known as making misrepresentations and omissions, which can be grounds for a broker fraud claim to recover losses.

There are also concerns that some brokerage firms, seeking to offload unwanted inventory, may have given their registered representatives enhanced incentives to sell these bonds to customers even if these investments were not aligned with the latter’s financial goals or risk tolerance levels. 

Making unsuitable investment recommendations and sales can also be grounds for a Financial Industry Regulatory Authority (FINRA) arbitration claim, not just against the broker but also the broker-dealer who may have failed to properly supervise their registered representative. 

Not only that but, if a firm encourages brokers to sell financial products because this is in its best interests rather than in the best interests of the customers, it too can be held liable for broker-dealer negligence or fraud. 

Frontier Communications Investment Fraud Lawyers 

Please contact SSEK Law Firm today if you were sold Frontier Communications bonds by your stockbroker or financial advisor. We would like to offer you a free, no-obligation case consultation and help you explore your legal options.

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