The telecommunications company filed for Chapter 11 protection following a legal loss that essentially caused a default of $5.8 billion outstanding bonds
Windstream Holdings, the parent company of telecommunications and services carrier Windstream, filed for Chapter 11 bankruptcy yesterday as it tries to restructure debt following a multi-million legal loss over the value of its bonds.
The Lowdown: Bankruptcy protection under Chapter 11 will provide Windstream with time to restructure its debt and recover from the stinging court loss that awarded bondholder, Aurelius Capital Management, $310 million plus interest. In addition, the protection could stave off other bondholder claims that could total $5.8 billion, according to published reports.
The Details: Windstream faced financial disaster following the court loss to Aurelius Capital Management, which sued over the 2015 spin off of the wire and cable services unit, Uniti Group. The Aurelius’s bonds wouldn’t mature until 2023. Not only did the court ruling entitle Aurelius to immediate and full payment, but also opened the door for other bondholders to make accelerated payment claims.
The Impact: Windstream will maintain normal operations for partners and customers in the 18 states in which it operates. The court ruling over the bonds does not affect the contractual relationship between Windstream and Uniti, a provider of wire and cabling services that Windstream spun off in 2015 and is at the core of the legal woes. Windstream says it’s secured more than $1 billion in financing from Citigroup to get it through the bankruptcy process.
Background: The Arkansas-based telecommunications company fell into dire straits earlier this month when a U.S. federal court sided with bondholder Aurelius Capital Management’s claim that Windstream’s 2015 spin-off of Uniti Group Inc. violated the terms of its financial restrictions. The court agreed with Aurelius that Windstream diluted the value of its bonds by removing assets from the company.
In related news, the Windstream board of directors extended CEO Tony Thomas’s employment agreement through 2024. In an SEC filing on Feb. 22, the company wrote, “Mr. Thomas’ continued leadership and performance are critical to the success of Windstream and provide the continuity and stability needed for the Company to focus on serving customers and all other stakeholders while the Board of Directors and management evaluate Windstream’s options.”
The Buzz: “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,” said Windstream CEO Tony Thomas.