Bankruptcy Judge Confirms Frontier Reorganization Plan
The Chapter 11 reorganization plan by Frontier Communications satisfies the bankruptcy code’s best interest test and other statutory requirements, said U.S. Bankruptcy Court for the Southern District of New York Judge Robert Drain at a teleconferenced virtual hearing Friday. Frontier filed a fifth amended joint plan of reorganization for approval earlier in the day. The Communications Workers of America urged the FCC Thursday to take more time to carefully review the transaction.
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The judge cited competitive and other potential costs to further delaying approval and keeping Frontier in the bankruptcy process. The plan is feasible and satisfies Bankruptcy Code section 1129 requirements, and Frontier’s settlement with secured debtholders is reasonable and a product of “arms-length bargaining by capable professionals” and judge-supervised mediation, said Drain.
Drain rejected two customers’ motions to dismiss at the hearing. Margaret Corbit, identifying herself in testimony as a Frontier customer for 40 years, questioned the company’s commitment to continue providing quality service post-reorganization, since she said the carrier hasn’t provided good service for many years. She asked the court to require Frontier to commit to the FCC’s goal of closing the digital divide through rural service upgrades and complying with federal and state funding obligations. The judge agreed with Frontier that the customers lack standing. Dismissing would lead to a “harmful result” because it would hurt Frontier and return the carrier to the status quo the customers complain about, Drain said. Customers’ allegations can be addressed through non-bankruptcy means such as regulatory action, the political process or competition, he said.
The FCC lacks enough information to verify Frontier’s reorganization will serve the public interest, CWA and California consumer advocate The Utility Reform Network (TURN) commented Thursday at the FCC. Comments are due Monday in docket 20-197. The current plan protects CWA’s collective bargaining agreement and members’ rights, but the FCC should require Frontier to file its final, court-approved plan within seven days of approval, said CWA and TURN, saying the federal agency should wait for results of 14 state regulatory reviews that Frontier seeks by this fall (see 2008190013).
The FCC should probe what Frontier means in its plan by a “virtual separation,” CWA and TURN urged. “While not defined, this appears to refer to a separation of Frontier’s fiber deployment from its non-fiber operations, including perhaps provision of retail services such as broadband and routine operations in the company’s ‘legacy’ or copper areas.” That could affect service quality and reliability and “set up a structure through which Frontier could seek to capture the revenues from fiber deployments for investors, potentially depriving retail operations of necessary cash flows, personnel, and other resources.” Frontier didn’t comment Friday.