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.