Windstream Updates On REIT Spinoff

Windstream Holdings updated investors on its planned real estate investment trust (REIT) spinoff on Thursday, disclosing that the Little Rock-based telecom expects to take a nearly 20% original ownership stake in the new company.

The company announced on Tuesday (July 29) that it would form an independent, publicly traded REIT that would own Windstream’s existing fiber and copper network and other fixed assets. In turn, Windstream will lease the network and those assets from the new REIT — which has yet to be named — for $650 million annually.

Windstream said it expects to retain 19.9% of the shares in the REIT and distribute the remaining 80.1% to Windstream stockholders. The retained shares will be sold opportunistically during a 12-month period following the spinoff, subject to market conditions, with the net proceeds used to retire corporate debt, the company said.

“Given the importance of the REIT formation to Windstream’s future performance, the board of directors and I are intently focused on completing the spinoff, and it remains a strategic priority,” said Windstream President and CEO Tony Thomas, who was slated to head the REIT before taking the reins of Windstream as CEO last week.

“This refined structure allows Windstream to reach our leverage goals faster to strengthen our competitive position, which we believe is appropriate and prudent given the fast changing telecom industry and rapidly evolving customer needs. By improving Windstream’s credit profile, the REIT benefits from having a financially stronger anchor tenant and retains the financial flexibility to grow and return capital to its shareholders,” Thomas said.

Windstream also announced it will hold a special meeting of stockholders on February 20, 2015, in conjunction with the REIT spinoff to approve a 1-for-6 reverse stock split. It will also present an amendment to the certificate of incorporation of Windstream Corp., a subsidiary of Windstream Holdings, that will facilitate the conversion of Windstream Corp. into a limited liability company (LLC).

The company said without the LLC conversion, it would incur a tax liability of approximately $600-$800 million at Windstream Holdings that would be triggered upon execution of the REIT spinoff.