Tuesday, October 29, 2019

Discovery Capital Management Letter to Frontier Communications Corp

A Bloomberg article about this today, here is the text of the letter:

The Frontier bond that is coming due in April 2020 is trading for 60 cents on the dollar which is a yield to maturity of 150%.

The September 2020 bond is trading at 55 cents for a yield to maturity of about 100%.

Remember that they recently sold their "Northwest Operations" (Washington, Oregon, Idaho, and Montana) for $1.35 billion, which represented 7% of revenues, but chose not to disclose what proportion of operating profit these operations represent. Often when a distressed company is  selling assets, it is an adverse selection process where the best stuff can find a buyer (like real estate at a failing retailer) and what remains with the company becomes more and more concentrated sludge.

Frontier has put options that expire in January 2021. The $2 put is $1.20 bid and $1.55 ask.

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