Windstream asks federal bankruptcy court to extend Chapter 11 protection until late 2020

by Wesley Brown ([email protected]) 4,624 views 

Nearly 10 months after seeking Chapter 11 bankruptcy protection, Little Rock-based Windstream Holdings Inc. will go back before a federal judge in nearly two weeks to request an extension to push its restructuring plan well into the second half of 2020.

In a debtors’ second motion filing before the court on Wednesday (Dec. 4), Windstream asked the court for another 247 days to complete its restructuring effort and exit bankruptcy, in part due to the lack of an agreement with its former real estate spin-off, Uniti Corp, over a multi-million dollar landlord-tenant agreement that analysts say could threaten the solvency of both Little Rock telecom concerns.

“In the approximately nine months since the Petition Date, the Debtors have made substantial progress, including securing $1 billion in debtor-in-possession financing, stabilizing their business operations, commencing and advancing litigation with respect to the Uniti Arrangement, and engaging in extensive mediation and negotiations aimed at addressing the key issues in these chapter 11 cases,” Windstream said in a 19-page filing with the U.S. Bankruptcy Court for the Southern District of New York.

“Since the Petition Date, the Debtors have been working toward as swift an exit from chapter 11 as possible under the circumstances, and intend to continue this effort,” Windstream continued. “Indeed, while significant work remains, the Debtors are working diligently — and in close coordination with their key creditor constituents — towards emergence from these chapter 11 cases.”

Windstream spokesman David Avery confirmed Thursday (Dec. 5) to Talk Business & Politics that Windstream had filed the petition for the extension on Wednesday night to appear before U.S. District Judge Robert Drain, the influential federal judge who has presided over several high-profile bankruptcy cases. Windstream’s court date has been set for 10 a.m. on Feb. 18 in White Plains, N.Y.

“We don’t have an additional statement to add beyond what is in the filing,” said Avery.

According to Wednesday’s filing, Windstream is asking the court for the right to extend its Chapter 11 bankruptcy plan through the “filing exclusivity period” on Aug. 25, 2020, to the “soliciting exclusivity period” on Oct. 26, 2020. Federal law allows debtors to extend the exclusivity period up to an additional 12 months if approved by the court.

In its court filing, Windstream also lays out a long list of numerous steps it has already taken toward a successful restructuring, including developing a new business plan and financial analysis of its major contracts and liabilities.

“Despite this significant progress toward a successful restructuring, given the size and complexity of these Chapter 11 cases, work remains,” Windstream states in the court filing. “Among other things, the Debtors continue to focus on prosecuting estate claims and causes of action related to the Uniti Arrangement, evaluating and making decisions regarding the assumption or rejection of executory contracts and leases, and pursuing terms of the Debtors’ financial restructuring that will ultimately be embodied in a Chapter 11 plan, all with the ultimate goal of a value maximizing confirmation process and the Debtors’ timely and efficient emergence from Chapter 11.”

Windstream and Uniti first entered into mediation on July 31 over the controversial master lease agreement provides for annual rent of $659 million to Uniti paid in equal monthly installments in advance, with an annual base rent escalator of 0.5%, according to securities filings. U.S. Bank and other unsecured creditors have also tried to change the terms of the lease agreement.

Originally, Windstream and all of its operating subsidiaries, including Windstream Services LLC, first filed its voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on Feb. 25, 2019. The publicly-traded telecom, which has nearly 1,500 employees in Arkansas and 13,000 nationwide, sought bankruptcy protection amid a lightning-fast collapse of investor and shareholder confidence in the company’s future in early 2019.

The bankruptcy filing followed a Feb. 15 ruling by U.S. District Judge Jesse Furman in the New York federal court that ruled Windstream violated bond agreements after splitting off the former Communications Sales & Leasing (CS&L) in April 2015.

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 exchange offer and consent solicitations in respect to senior notes issued by its Windstream Services LLC to finance the spinoff of the Little Rock-based real estate investment trust (REIT), which is now known as Uniti Corp. The court further ruled that Aurelius was entitled to a $310.5 million judgment, plus interest from and after July 23, 2018.

Last month, Windstream told federal bankruptcy officials in upstate New York that court-ordered mediation between the Little Rock broadband operator, Uniti Corp., and an official committee of unsecured creditors that began in late July had hit a snag. “The parties have not reached a resolution with respect to the issues and claims subject to the Mediation,” stated the 12-page federal bankruptcy court filing. “Therefore, the Mediation has been suspended indefinitely by the Mediator.”

In a statement then, Windstream CEO and President Tony Thomas said the Little Rock rural broadband carrier would now look to the courts to resolve a long-standing dispute between the two Arkansas publicly traded concerns.

“We were unable to reach a satisfactory agreement with Uniti. Now we are fully focused on pursuing our litigation claims to conclusion,” said Thomas. “Windstream will continue to serve our customers throughout the restructuring process and strategically invest to expand rural broadband access through 5G fixed wireless technology and fiber deployment, while transitioning businesses to next-generation products and services.”

Although Uniti has not responded to requests for comment concerning its ongoing disagreement with its former parent, the Arkansas REIT did file a response on Nov. 12 with the Securities and Exchange Commission concerning the failed talks on the same day that the company’s stock slid to a 52-week low of $5.24 per share on Nov. 12.

“The mediation has not been terminated; however, the parties have not reached a resolution with respect to the issues and claims subject to the mediation. Therefore, the mediation has been suspended indefinitely by the mediator,” said Uniti.