Windstream settles suit

Deals with Uniti, creditors pave way to exit bankruptcy.

Windstream Holdings Inc. announced two major agreements Monday that provide the company with financial relief and clear the way for the communications provider to exit bankruptcy by midyear.

Agreements with creditors and settlement of a lawsuit with Uniti Group Inc. will lower Windstream’s existing debt by more than $4 billion, provide for a financing plan to exit bankruptcy and outline $1.75 billion in capital expenditures in which it will benefit. Windstream also will receive about $800 million in cash from Uniti.

“This puts us on a timeline to emerge from the [bankruptcy] restructuring by midyear,” Windstream President and Chief Executive Officer Tony Thomas said.

The agreement with creditors outlines a restructuring plan that would reduce Windstream’s existing debt by $4 billion and lower its annual debt payments even more going forward, the company announced.

A separate agreement with Uniti settles a lawsuit that was scheduled to begin trial on Monday related to $650 million in annual payments that Windstream has been making to lease fiber lines from Uniti. Windstream sued last year over the agreement, contending it was overpriced and financially burdensome.

“This is a great opportunity for Windstream and Uniti to reset their relationship and go forward with a structure that’s going to be very productive for both companies,” Thomas said. “It positions Windstream, and Uniti, for long-term success.”

Uniti President and CEO Kenny Gunderman also is relieved the issue is settled. “We are pleased to have achieved a mutually beneficial outcome for both Uniti and Windstream, which has been our stated goal from the beginning,” Gunderman said in a prepared statement.

Uniti was created in 2015 after a spinoff from Windstream. Windstream filed for bankruptcy in February 2019 after Aurelius Capital Management charged that the 2015 spinoff and the lease agreement that created Uniti violated the terms of Windstream’s bonds.

A federal court ruled in favor of Aurelius Capital, leading

Windstream to file for bankruptcy protection to reorganize its business and also to delist its stock, which now trades on the pink sheets.

After the bankruptcy filing, Windstream creditors pressed for a better leasing arrangement with Uniti and that led to the lawsuit filed in July.

Uniti benefits from the settlement because a loss at trial could have forced it to file for bankruptcy since Windstream is Uniti’s largest customer, according to a report Monday from Cowen research. The report noted that “the settlement removes the meaningful binary risk of a negative trial outcome, which could have led to a Uniti bankruptcy.”

Major obstacles have been removed for Windstream though there are still a few hurdles to clear. The agreements will require approval from the U.S. Bankruptcy Court, Windstream creditors and regulators in the states where the company operates.

“We look at it holistically and getting all this done so we can exit [bankruptcy] in the mid-2020 timeframe,” Thomas

said.

When it filed for bankruptcy a year ago, Windstream had debt of about $5.8 billion. The agreement announced with creditors on Monday reduces that by more than $4 billion and also restructures annual debt payments to provide financial relief to Windstream.

“This agreement demonstrates our creditors’ confidence in our go-forward business plan and will enable Windstream to work through the financial restructuring process on an expedited basis,” Thomas said in a prepared statement.

As part of the lawsuit settlement, Uniti will invest up to $1.75 billion in network improvements for Windstream through 2030. Uniti also will pay Windstream about $490 million in cash and purchase fiber line assets from Windstream for another $285 million.

“Our new capital structure will enable continued innovation in vital enterprise-class offerings … and reinforce our ability to deliver an amazing customer experience supported

by a superior digital platform,” Thomas said.

The infrastructure investments from Uniti will allow Windstream to expand 1 gig internet service to more than half of the 4 million broadband customers it serves. Today, only about 7% of those customers have access to 1 gig speeds.

Windstream will continue to lease fiber assets from Uniti and pay essentially what it does today, about $650 million annually, Thomas said. “It will be restructured but we’ll continue to have a lease arrangement with Uniti,” he added. “The big change was Uniti’s commitment to invest capital into the network infrastructure in the amount of $1.75 billion.”

The agreements give Windstream financial support to invest in serving customers. “It’s a good deal that we’ve reached with Uniti and our creditors. It has Windstream well-positioned to move forward,” Thomas said. “There’s no doubt that now the entire team’s focus can be 100% on running the business.”

Thomas