Facing $310M judgment, Windstream files for bankruptcy
Bankruptcy tied to 2015 spinoff, Uniti Group, Inc.
Windstream Holdings filed for Chapter 11 bankruptcy protection in New York Monday, Feb. 25.
“Windstream did not arrive in Chapter 11 due to operational failures, and currently does not anticipate the need to restructure material operations,” Windstream CEO Anthony W. Thomas said in a statement Monday.
With the approval of the bankruptcy court, the network communications company plans to continue to pay employees and maintain services and vendor relationships. Windstream said on Monday it had received a commitment from Citigroup Global Markets Inc. for $1 billion in debtor-in-possession financing to support business operations.
The financing, combined with cash generated by the company’s ongoing operations, will be available to meet Windstream’s operational needs, the company said.
A U.S. district court on Feb. 15 ruled against Uniti Group Inc., a spinoff of Windstream’s fiber and cooper assets, saying Uniti violated agreements with bondholders and exposed the company to a $310 million judgment.
“The Board of Directors and management team of Windstream determined that filing for voluntary Chapter 11 protection is a necessary step to address the financial impact of [the] decision,” Thomas said.
Thomas called the reorganization "a necessary step to address the financial impact" of the judge's decision and "the impact it would have on consumers and businesses across the states in which we operate."
"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," he said. "We acted decisively to secure the long-term financial stability of Windstream, and we are confident that, upon completion of the reorganization process, we will be even better positioned to invest in our business, expand our speed and capabilities for our customers and compete for the long term."
Windstream received a commitment from Citigroup Global Markets Inc. for $1 billion in debtor-in-possession financing that would help it meet its operational needs.
In its legal filings, Windstream alleged that "Aurelius acquired its position" as bondholders "for the sole purpose of seeking to manufacture this alleged default and declare that a credit event has occurred or is occurring, in order to collect a credit default swap payoff."
Thomas said the company was "disappointed" and "frankly surprised" and said executives would pursue "all available options, including post-trial motions and an appeal. He said the firm would also work with creditors on the next course of action.
Meanwhile, Aurelius issued a statement saying that Windstream could have "easily" averted the outcome "first by not playing fast and loose with its noteholders in 2015" 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," Aurelius said. "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."
Windstream has set up a website with more information on its restructuring at https://windstreamrestructuring.com/
It filed the bankruptcy petitions in the U.S. Bankruptcy Court for the Southern District of New York.