Frontier Communications (NYSE:FTR) has been surrounded by bearish market sentiment for the better part of the past year. Its shares have lost about 50% in value over the past six months alone and, to make matters worse, readers have expressed concerns that Frontier might be on the verge of breaching its debt covenants which could potentially empower creditors to completely suspend its dividend payouts. But that's far from reality. Let's take a closer look at Frontier's debt profile and its debt covenants to have a better understanding about how far it really is from breaching its debt ceiling.
The Debt Affair
Let me start by highlighting Frontier's debt covenants. Per the fourth amendment of its credit agreement, Frontier is required to maintain a total leverage ratio of equal or lower than 5.25x till March 31, 2018, after which the debt ceiling declines by 25bps each subsequent year until 2020, with the ceiling ultimately settling at 4.5x post-2020 according to the latest terms at least.