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Windstream Loses Court Ruling; Service Provider Faces Potential Bankruptcy

Windstream, the embattled service provider, has lost a court ruling vs. Aurelius Capital Management and the fallout could be dramatic. Indeed, shares in Windstream Holdings Inc. (NASDAQ: WIN) are down roughly 65 percent in pre-market trading as of 9:06 a.m. ET on February 19, and the company may be facing potential bankruptcy.

Updated February 26, 2019, 8:52 p.m. ET: Follow this regularly updated news feed about Windstream’s bankruptcy filing status. 

Updates From February 18 and Earlier

Updated February 18, 4:41 p.m. ET: Windstream Holdings, Inc. is postponing the release of the company’s fourth-quarter and full-year 2018 financial results amid the court ruling. The earnings release had been scheduled for February 21. The results will now be released no later than March 18, the company says.

In a prepared statement about the court ruling, Windstream President and CEO Tony Thomas said:

“We are disappointed in, and frankly surprised by, the ruling and will be taking immediate steps to pursue all available options, including post-trial motions and an appeal. Additionally, we will work with our creditors on the next course of action. Windstream provides critical voice and data services to customers across the U.S. We remain committed to serving them and ensuring they realize the maximum benefit in transitioning to next-generation technology solutions and premium broadband services.”

Updated February 19, 12:30 p.m. ET: Aurelius Capital offered a sharp counter-statement:

“We take no pleasure in Windstream’s resulting financial predicament.  Windstream could easily have averted it – first by not playing fast and loose with its noteholders in 2015, hoping nobody would hold the company to account, and second by settling.  Instead, Windstream wasted an exorbitant amount – more than would have been needed to settle with us at the time – on an ineffective exchange offer and then on litigation.

In our view, a management and a board with an extreme and unwarranted assessment of Windstream’s legal case chose to bet the company.  The company lost.”

The situation could be dire. According to Bloomberg:

“The fate of Windstream Holdings Inc. was cast into doubt after a court ruled that the rural phone company defaulted on its bonds in 2015 by spinning off Uniti Group Inc.

The ruling in Manhattan federal court is a victory for New York hedge fund Aurelius Capital Management LP, which contends that the deal unfairly stripped bondholders of assets that back up their investment. Windstream, which serves about 1.4 million consumers and small businesses in 18 states, has warned that a defeat could force it into bankruptcy.”

Windstream had been selling off some assets ahead of the ruling in an attempt to strengthen its balance sheet. The jettisoned assets include EarthLink’s consumer Internet business as well as certain fiber assets. The company also had layoffs and eliminated its dividend in 2018.

Windstream’s most recent growth strategy involved effort to build SD-WAN and SIEM security services revenues.

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13 Comments

Comments

    Jacob Henry:

    Not the outcome the company wanted.

    Patrick:

    The ceo was previously a cfo, so this financial maneuver was his one contribution to the company and it failed. Aurelius’ argument on a small technicality was well played. The company will likely go into restructuring and the bond holders will of course agree because they would get a nickel on the dollar if liquidated. That’s it folks, show’s over……….

    GMA ENRAGED:

    Not so sure about that windstream should use the monies from recent sales and get rid of Aurelius.
    They still could appeal but paying now stops the interest from growing.
    Secondly win has other assets it can sell and I am sure can take out another bond since creditors see a vast improvement of windstream and where they are headed.
    They may win that appeal but that aside they need to keep making money and moving in a positive direction.
    Remember almost all of the bond holders signed the agreement to wave any alleged default so just think of Aurelius as bonds coming due in say May 2019 and they may be able to push payment out to 2020.
    Personally I think everyone is always ready to think of the worst of this company when in fact they have turned things around and if it weren’t for this filthy snake their comeback would have happened much sooner than it will now.

    AO:

    What’s going to happen with the recently acquired Broadview VoIP platform?

    Patrick:

    I respect your optimism of their chances on an appeal, however this technicality that was identified by the hedge fund is quite strong. I don’t agree with shops like Aurelius who make their money on an oversight in covenant language or if someone forgot to dot an i — but this financial maneuver was no small oversight and was a strategic move by windstream to restructure their balance sheet. It’s likely not enough due diligence was conducted to determine their legal exposure when the decision was made to spin off uniti.

    GPS:

    GMA Enraged: “Turned this company around” are you kidding? I assume you are one of the executives. Tony Thomas and his goombas have run this company into the ground. This companies management style changes a quickly as the wind blow. He recently was sold a bill of sale to change the business model to that of the recently purchased Broadview. There is only so much smoke that can be blow where the sun doesn’t shine has come to an end. Paul is coming to collect from Peter. This company is a sinking ship and the loss of this lawsuit only increased the size of the hole.

    Want to know:

    Good question! What happens to the recently acquired Broadview VoIP platform?
    Does anyone know?

    randall:

    PAETEC should have never merged with this crap corporation.

    Charles Bates:

    What will happen at the local level if Windstream does restructure? I think they are the only game in town. Will service ever disappear in a situation like this?

    Eq4bits:

    What does this mean for Windstream customers? Are we going to be left with NO phone service and NO internet service at all?

    Joe Panettieri:

    We will be sure to update the article if cash flow becomes an issue and/or service levels stumble.
    -jp

    Marie Stoutenborough:

    What about the people receiving pension checks each month from Windstream???

    Joe Panettieri:

    Hi Marie: I would contact Windstream HR directly for continued updates. Also, we will be tracking terms of the financial reorganization when they emerge. We will be sure to probe if there are any mentions of a pension plan in the new financial plan.
    -jp

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