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Windstream Bankruptcy Filing: The Complete Saga

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Bankruptcy Court

The Windstream bankruptcy filing saga ended this week as the company finally emerged from chapter 11.

The exit capped off a 19-month process that brought big changes for the business communications giant and its partners.

Windstream exited bankruptcy with two-thirds of its debt erased and $2 billion in new capital. It’s forging a new path with new owners, and plans to attract new customers and partners.

In addition, Windstream is now privately held. The Nasdaq delisted Its stock after it filed chapter 11 in February 2019.

Layne Levine is president of Windstream Enterprise. He said partner reaction to the bankruptcy exit has been positive.

“One partner, they’ve been telling me they were a very strong partner for us prior to restructuring,” he said. “But they completely shut us off during restructuring. And now that we’ve come out of restructuring they said via text, ‘we’re ready to start talking.’ So I think we’re going to see a lot more of that.”

Windstream is going to be “extremely aggressive” in the months ahead, Levine said. The strategic product set focuses on its SD-WAN and UCaaS capabilities anchored with OfficeSuite.

Miss any details of the Windstream bankruptcy filing saga? Scroll through our gallery below for a recap of all of the action.

Chapter 11 filing

That Fateful Day

In February 2019, Windstream stunned the channel by filing for chapter 11 bankruptcy protection after losing its court battle against Aurelius Capital Management, a Windstream bondholder that claimed breach of contract.

The court ruled that Aurelius was entitled to a judgment of nearly $310.5 million, plus interest, after July 23, 2018. At the time, Windstream had about $5.8 billion in outstanding bonds and loans.

Channel reaction

Channel Reaction

Windstream's chapter 11 filing had the channel buzzing. Clients were worried, agents braced for potential commission reductions and master agents hoped for the best.

Shane Stark, Carrier Access’ COO, and a member of the Channel Partners Editorial Advisory Board, said his company got questions from some clients and “we’re seeking Windstream to get exactly what those answers are going to be.”

“In the past when that happened, there’s been no interruption of service, but anytime something like this happens, people start to wonder what’s going on,” he said. “Most of these folks come out of [bankruptcy] better than they went into it.”

Quarterly losses

Quarterly Losses Amid Bankruptcy

In March 2019, Windstream reported a $549 million loss, and a more than $100 million drop in revenue and sales for the fourth quarter of 2018 compared to the same quarter in 2017. And it reported a $2.3 billion loss, and $133.7 million drop in revenue and sales for the first quarter of 2019 compared to the same quarter in 2018.

Revenue and sales totaled nearly $1.32 billion, down from $1.45 billion for the year-ago quarter. The communications giant reported a $121 million net loss in the previous year's quarter. Despite it all, the company beat Wall Street’s expectations.

Windstream Charter

Windstream Fights Charter ‘Scare-Tactic’ Campaign

In spring 2019, Windstream filed suit against Charter Communications alleging it engaged in a “scare-tactic” campaign. The campaign deceived customers into believing Windstream would no longer provide services and was going to liquidate.

In January, New York Bankruptcy Judge Robert Drain issued a partial summary judgment finding Charter liable for violations of the federal Lanham Act and state laws for using false advertising to try to convince Windstream customers that its bankruptcy filing meant they could lose their services.

Windstream said nearly 1,400 of its customers switched their service to Charter. As a result, it lost up to $5.1 million in profit. Windstream is seeking a verdict requiring Charter to pay for its losses and a decision is still pending.

Partner program

Partner Program Changes

In April 2019, Windstream announced it planned to cut 15% of its partners who hadn’t sold anything in years, while increasing commissions for the remaining ones for selling strategic products.

Windstream partners also got an unexpected shock in the form of a letter saying their current agreements are null and void, and they were required to sign new agreements or risk being cut off from commissions. The partner program included 31 standard agreements and, at the bankruptcy court’s request, Windstream consolidated everyone on a single agreement.

Windstream Uniti

The Windstream-Uniti Battle Begins

In July 2019, two Windstream creditors said they wanted the company to stop making $54 million monthly lease payments to Uniti Group.

Windstream makes monthly rent payments to Uniti, a real estate investment trust (REIT), under a master lease in exchange for access to Uniti’s network, which Windstream uses to serve its customers. UMB Bank and U.S. Bank filed a motion asking the bankruptcy court to order Windstream to stop making Uniti lease payments. The banks said the payments are part of a financing arrangement, as opposed to lease arrangements, and financing arrangements are prohibited under bankruptcy proceedings.

The two banks requested that the bankruptcy court appoint a mediator to “negotiate” the monthly network rental agreement between Windstream and Uniti. A judge approved the mediator.

Channel leadership

Channel Leadership Changes

Last November, Windstream reorganized its channel leadership amid bankruptcy, with Curt Allen stepping down from his role as Windstream Enterprise’s president of strategic channels.

Windstream promoted Matt Milliron (pictured), previously vice president of channel sales, to channel chief and head of strategic channels, while Allen moved into an advisory role following program transition to Milliron. Allen emerged from retirement in October 2017 to take over as Windstream’s channel chief. He's since moved on and is now Vonage's channel chief.

Exec bonuses

Executive Bonuses Amid Bankruptcy

A bankruptcy judge approved multimillion-dollar bonuses for Windstream's top executives as the company continued working through bankruptcy. David Avery, Windstream’s vice president of corporate affairs, said the plan was similar to the performance incentive program the company used prior to filing for restructuring. The bonuses aimed to drive business performance.

Under the plan, Tony Thomas, Windstream’s president and CEO, would receive as much as $9.5 million, and Robert Gunderman, chief financial officer and treasurer, would get as much as $3.5 million.
Key agreements

2 Key Agreements

In March, Windstream announced two key agreements that helped it move closer to exiting bankruptcy.

The company announced a settlement with Uniti, to whom Windstream had owed a $650 million yearly lease for accessing network assets. Uniti would instead pay Windstream $490 million in cash, $40 million for particular Windstream fiber assets and $244.5 million in proceeds from selling Uniti stock to Windstream creditors. Uniti is also investing $1.75 billion in capital improvement for Windstream ILEC and CLEC properties over 10 years.

The Windstream-Uniti battle became pretty heated, and Windstream planned to take Uniti to trial.

In addition, Windstream’s first lien creditors agreed to its financial restructuring plan to reduce its debt by $4 billion.

Court ruling

Court Ruling Big Step Toward Bankruptcy Exit

In May, a federal judge approved Windstream’s proposed settlement with Uniti. The judge also approved a commitment by Windstream lenders to invest in the reorganized company. Windstream said it had approval from the majority of its creditors which hold about 80% of its $5.5 billion in debt.

“The court ruling is a significant step forward in our chapter 11 process and keeps us on a path to emerge from restructuring as early as the end of summer, pending regulatory approvals,” Kristi Moody, Windstream general counsel, told Channel Partners. “The Uniti agreement provides significant and essential network investments for Windstream over the next 10 years, positioning the company for long-term growth.”

Restructuring plan

Restructuring Plan Approved

In June, the bankruptcy court approved Windstream’s restructuring plan and the company expected to exit bankruptcy in late August.

Windstream would emerge from bankruptcy as a privately held company. It would reduce its debt by more than $4 billion or about two-thirds. And it would have access to about $2 billion in new capital to expand 1 gig internet service in rural America.

However, the wait continued through August and well into September.

Bankruptcy exit

The Day Finally Arrives

Windstream finally exited bankruptcy on Sept. 21. Cindy Whelan, Omdia’s practice leader for enterprise networks and wholesale, said the exit will improve the company’s perception as a stable provider in the market.

“I don’t think Monday’s developments substantially change Windstream’s position in the market,” she said. “But the exit does eliminate the ability of competitors and customers to question the company’s future, which will help partners working with prospective customers.”

Ted Schuman is founder and CEO of master agent PlanetOne. He said channel partners will see a “renewed energy and continued enthusiasm for their success” from Windstream.


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