A New York court on Thursday (June 25) signed off on Windstream Holdings Inc.’s Chapter 11 bankruptcy plan. The move is expected to allow Little Rock-based Windstream to exit bankruptcy as a privately-held company in late August, the company said.
The U.S. Bankruptcy Court for the Southern District of New York confirmed Windstream’s plan of reorganization, which was the result of a lawsuit filed last year and ensuing negotiations with vendors, including Little Rock-based Uniti Corp.
The exit plan will allow Windstream to reduce its debt by more than $4 billion, or approximately two-thirds, and have access to approximately $2 billion in new capital to expand 1 Gig Internet service in rural America and to continue enterprise operations.
“We were able to reach this important milestone thanks to the support of our financial stakeholders, as well as our customers, vendors and business partners. The court’s confirmation of our plan puts us on a definitive path to emerge from restructuring with a stronger balance sheet and healthy liquidity position to continue making network and software investments for the benefit of our customers,” said Tony Thomas, president and CEO. “I want to thank the entire Windstream team for remaining focused on our customers and for tirelessly providing essential communications services during the reorganization process.”
“We look forward to beginning this new chapter for Windstream. When we emerge, our lenders will become our new owners and strategic partners and are aligned with our long-term strategy and mission to deliver quality and reliable services. As a private company, Windstream will have increased flexibility to invest in our network, accelerate our transformation and return to growth. Together, we will emerge from this process as a stronger company able to successfully compete in the communications marketplace,” Thomas added.
Windstream once employed nearly 1,500 in Arkansas and 13,000 nationwide.
Windstream initially filed for Chapter 11 bankruptcy a year ago after a legal ruling by U.S. District Judge Jesse Furman in New York determined that it had violated bond agreements after splitting off the former Communications Sales & Leasing (CS&L) in April 2015. CS&L was the previous name of Uniti, a real estate investment trust that was spun out of Windstream and manages its fiber optic network.
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. The court further ruled that Aurelius was entitled to a $310.5 million judgment, plus interest from and after July 23, 2018.
At the time of the ruling, Windstream said it would bankrupt the company, which led to the Chapter 11 filing. It also led Windstream, a former Fortune 500 company, to be delisted on the NASDAQ stock exchange.
The biggest obstacle to resolving the bankruptcy status was between Windstream and Uniti.
In a settlement announced in March and approved in May, Uniti agreed to invest up to $1.75 billion in growth capital improvements, consisting of long-term fiber and related assets in certain Windstream properties over the initial term of new leases.
On the first anniversary of the initial investment for growth capital improvements, the annual base rent payable by Windstream will increase by an amount equal to 8.0% of such new investment, subject to a 0.5% annual escalator.
For growth capital improvements that include fiber deployments in CLEC territories, Uniti will have the option to require that such deployment be engaged in jointly, with Uniti owning and operating any excess new strands deployed beyond Windstream’s forecast. In return, Uniti agreed to fund 50% of the total cost to deploy the CLEC fiber.
Windstream will also transfer to Uniti certain dark fiber rights of use, that currently generate approximately $21 million annually, and relinquish its rights to use 1.8 million fiber strand miles currently leased by Windstream that are either un-utilized or utilized for the dark fiber being transferred.
Uniti will purchase for $40 million certain Windstream-owned fiber assets, including certain fiber contracts generating $8 million of fiber strand miles covering 4,100 route miles. Windstream and Uniti agreed to bifurcate their master lease into two structurally similar agreements with new terms for leases of certain properties.
The two companies also agreed to mutual releases with respect to any and all liability related to any claims and causes of action between them, including those relating to the Chapter 11 proceedings and the master lease.
All told, Uniti will pay $400 million to Windstream on a quarterly basis over a five-year period at an annual interest rate of 9%. That amount could be reduced if proceeds from the sale of Uniti stock to certain Windstream creditors is approved. Uniti will also sell to certain first lien creditors of Windstream 38.6 million shares of Uniti common stock at a price of $6.33 per share.