UMB Bank and the U.S. Bank National Association, which are both Windstream creditors, have demanded that Windstream stop paying Uniti $54 million monthly to use its network. Windstream last week requested that its chapter 11 bankruptcy court appoint a mediator “to oversee negotiations with Uniti,” but Uniti protested the the idea of a mediator.
Uniti in a bankruptcy court filing described the banks’ motions as having “major factual and legal flaws and inconsistencies” and “a mockery of due process.”
“Tellingly, the movants cite no objective or contemporaneous expert analysis but point to statements by Windstream management made during this bankruptcy as part of efforts to demand concessions from Uniti in arguing the network’s useful life is shorter than it was determined to be in 2015,” Uniti’s 40-page filing states.
Windstream initially described the creditors’ motion as “both procedurally and substantively improper,” Edward Gately reported.
Windstream in 2015 divested network assets into a publicly traded real estate investment trust (REIT) now called Uniti Group. Uniti owns and buys communication distribution systems, and leases them to telecommunications companies. Uniti said in its filing this week that Windstream Holdings must continue to pay rent, lest it face a possible eviction.
|Read our original story on Windstream declaring bankruptcy and our follow-up featuring at least one master agent that thinks paying commissions to partners could be a concern.|
“Until its recent adoption of the tortured phrase ‘Uniti Arrangement,’ Windstream has consistently, including during this bankruptcy, described the relationship between Uniti and Holdings as that of landlord and tenant, and acknowledged that ongoing, uninterrupted access to the leased network is critical to the survival of its business,” the filing said.
President and CEO Kenny Gunderman released a statement.
“Uniti is encouraged by the continued efforts to reach a mutually beneficial outcome between Windstream and Uniti,” Gunderman said. “We remain focused on serving the interests of our stakeholders first, while also remaining hopeful that Windstream will emerge with an improved business.”
Seeking Alpha suggested earlier this year that negotiations could result in Uniti lowering the rent and suffering a smaller cash flow. The financial-analysis website estimates that Windstream pays Uniti about $650 million each year — about 60% of the REIT’s revenue.
Gunderman said earlier this year that he intends to remain “long-term partners” with Windstream.
“This latest effort by out-of-the money junior creditors of Windstream to extract value from Uniti does nothing to change that essential fact. Consistent with the views of Windstream’s counsel and advisers when the lease was established, we believe that the lease is a true lease and will be respected and enforced as such, and we will vigorously contest any argument to the contrary,” Gunderman said.
Bloomberg wrote earlier this year about the awkward situation between Gunderman and his brother Robert, who is Windstream’s chief financial officer.