Little Rock real estate investment trust Uniti Corp. on Wednesday (Feb. 27) said it believes former parent Windstream Holdings, Inc. will successfully steer through its Chapter 11 bankruptcy filing that puts both Arkansas companies’ futures in peril.
Windstream on Monday said its holding company and subsidiary, Windstream Services LLC, have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. Chapter 11 bankruptcy allows a business to file a reorganization plan for its debt over a 120-day period.
The publicly-traded telecom is seeking bankruptcy protection amid a lightning-fast collapse of investor and shareholder confidence in the company’s future following a court ruling on Feb. 15 by U.S. District Judge Jesse Furman for the Southern District of New York that ruled Windstream violated bond agreements in 2015 after splitting off the former Communications Sales & Leasing (CS&L), which is now Uniti.
Furman’s decisive ruling arose from challenges by Aurelius Capital Management and U.S. Bank National Association that the 2015 deal was invalid under the terms of a debt swap exchange in respect to senior notes issued by its Windstream Services to finance the spinoff of the Little Rock REIT. The court further ruled that Aurelius was entitled to a $310.5 million judgment, plus interest from and after July 23, 2018.
“We continue to closely monitor Windstream’s situation, and believe it will successfully navigate through the reorganization process. We were pleased to see Windstream state its intent to continue operations in the ordinary course and pay in full its service providers,” said Uniti President and CEO Kenny Gunderman. “We are also encouraged by the Federal Communications Commission’s recent statement regarding the importance of Windstream’s continued service to its customers, and the FCC’s focus on the importance that federal funds provided to Windstream are put to their appropriate use. We believe access by Windstream to Uniti’s network remains critical to Windstream’s operations and ability to serve those customers.”
On Tuesday, the rural broadband operator said it received “first day” approvals from the U.S. Bankruptcy Court in New York after filing motions to access up to $400 million of its $1 billion in debtor-in-possession financing it received from Citigroup Global Markets Inc. This financing, combined with access to the cash generated by the company’s ongoing operations, is available to meet Windstream’s operational needs and continue operating its business as usual, company officials said.
Windstream is Uniti’s largest customer and is obligated for more than 60% of its spinoff’s revenues due to a landlord-tenant, lease-back agreement. Arkansas’ first publicly held REIT is still expected to report its fourth quarter and year-end 2018 financials after the close of market on Thursday.
“Uniti remains focused on the operations of each of our business segments and serving the interests of our stockholders, our employees, our customers, and our other partners,” Gunderman said.