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Windstream Stuns Industry, Channel, Files Bankruptcy in ‘Offensive Move’

Bankrupt

After losing its court battle against Aurelius Capital Management, Windstream has filed for chapter 11 bankruptcy protection.

On Feb. 15, the U.S. District Court of the Southern District of New York ruled in favor of Aurelius, a Windstream bondholder, saying the communication giant’s 2015 spinoff of copper and fiber assets into the Uniti Group real estate investment trust (REIT) breached their contract.

The court ruled that Aurelius is entitled to a money judgment of nearly $310.5 million, plus interest after July 23, 2018.

Windstream has about $5.8 billion in outstanding bonds and loans.

Looking for more? We got hot takes on Windstream’s bankruptcy from master agents Telarus and Sandler Partners. Sandler told us commission cuts will be a potential concern.
Ovum's Mike Sapien

Ovum’s Mike Sapien

Mike Sapien, Ovum’s vice president and chief analyst of enterprise services, said when deciding to file for bankruptcy, it’s “best to move first before the creditors force it upon you.”

“So Windstream [made] an offensive move to avoid potential reactive moves forced by creditors/bondholders,” he said. “Windstream did not have much choice given their current situation and having other bondholders.”

Windstream “clearly miscalculated” the risks of its earlier move to split the company and create its REIT a few years ago, Sapien said. Fortunately most telcos avoided this move and kept their telecom assets within their company, he said.

David Avery, Windstream’s vice president of corporate affairs, tells Channel Partners his company has sufficient liquidity to run its business throughout the court-supervised process. Windstream also has received a commitment for $1 billion in new financing from Citigroup Global Markets, he said.

Windstream's David Avery

Windstream’s David Avery

“Following court approval, which we expect in the next couple of days, this financing, combined with cash generated by the company’s ongoing operations, will be available to ensure we continue operating as usual,” he said. “Our partnership with channel partners is very important to us and we are committed to ensuring all customers realize the maximum benefit in transitioning to next-generation technology solutions and premium broadband services. While we may not have all of the answers today, we are committed to keeping our channel partners informed throughout this process as there are updates to share.”

Windstream said it plans to use the court-supervised process to address “debt maturities that have been accelerated as a result of the recent decision by Judge Jesse Furman.”

“Following a comprehensive review of our options, including an appeal, the board of directors and management team determined that filing for voluntary chapter 11 protection is a necessary step to address the financial impact of Judge Furman’s decision and the impact it would have on consumers and businesses across the states in which we operate,” said Tony Thomas, Windstream’s president and CEO. “Taking this proactive step will ensure that Windstream has access to the capital and resources we need to continue building on Windstream’s strong operational momentum while we engage in constructive discussions with our creditors regarding the terms of a consensual plan of reorganization.”

Windstream’s leadership “acted decisively to secure the long-term financial stability of the company, and “we are confident that, upon completion of the reorganization process, we will be even better positioned to invest in our business, expand our speed and capabilities for our customers and compete for the long term,” Thomas said.

In conjunction with the filing, Windstream said it has filed a number of customary first day motions. These motions will allow it to continue to operate in the normal course of business without interruption or disruption to its relationships with its customers, vendors, channel partners and employees. The company expects to receive court approval for these requests and intends to …

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3 comments

  1. Avatar David K. February 27, 2019 @ 12:33 am

    This was bound to happen following a series of management misteps including the purchase and sale of data centers, purchase and sale of Earthlink, and the bizare fiber asset REIT spinoff and leaseback scheme. Would be nice to see a stable company like TDS or Consolidated Communications acquire Windstream following the bankrupty to expand their footprint, turn things around, and provide customers some much needed stability.

  2. Avatar Anonymous March 4, 2019 @ 4:02 pm

    Make no mistake, Windstream management will evaluate partner contracts to determine those they will no longer want to honor through the BK process. Those that are collecting fees but not actively selling will be top of the list.

  3. Avatar emily s johnson March 11, 2019 @ 10:58 am

    So what happens to my shares of Windstream stock…do I consider them a total loss…or will I ever recover any money invested …

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