Windstream, Uniti seen as nearing settlement ahead of trial

Economic strife between Little Rock’s Windstream Holdings and Uniti Group appears to be near an end.

Negotiations between the two picked up again this month, after several other starts and stops, and public documents indicate the two communications providers are nearer than ever to a settlement that both need. Filings show that the two are in agreement on most highlevel financial details as they work to avoid a trial set for March 2-6.

Last July, Windstream sued Uniti over a $650 million payment that Windstream makes annually to lease copper and fiber lines from Uniti. The arrangement provides network access that Windstream needs to deliver services to most of its customers across the nation. Windstream contends that the agreement is burdensome with rates that are too high.

That suit is scheduled for trial before Judge Robert Drain in U.S. Bankruptcy Court in the southern district of New York. Analysts who follow the issue are cautiously predicting a settlement to avoid court, based on documents filed by both companies.

“Both sides seem to be converging towards a deal and the question remains whether or not they settle or go to court,” Citi Research noted in a Feb. 14 analysis. “Net-net, we see a higher probability that the parties eventually settle before the recharacterization case goes to court.”

Likewise, Bloomberg Intelligence said it expects the companies “to put a settlement before the court in short order.”

And analysts over at Cowen Research said they are encouraged and “cautiously optimistic” that the companies will strike a deal to avoid the court trial.

An interesting announcement by Uniti on Wednesday also led observers to speculate that a deal could be done as soon as Monday. Uniti said Chief Financial Officer Mark Wallace and Vice President of Finance Bill DiTullio will speak at a J.P. Morgan investors conference Tuesday morning in Miami.

Uniti has yet to announce a date for the release of its fourth-quarter earnings announcement.

Taken together, those two issues are fueling speculation of a deal that is being finalized. Uniti would be unlikely to expose two of its top executives to questions at the J.P. Morgan conference unless the company is confident a deal is at hand.

Windstream added little clarity to the settlement issue when it released fourthquarter earnings Thursday.

“Windstream remains focused on securing a result that maximizes value for all company stakeholders,” Chief Executive Officer Tony Thomas said. “As part of this process, Windstream continues to work to modify our arrangement with Uniti. Absent an acceptable negotiated resolution, Windstream is prepared to pursue its litigation claims to conclusion.”

All reports indicate the companies have reached agreement on the key financial terms of a settlement to

the lease dispute.

Citi’s report estimated that Windstream’s annual lease payment would be reduced by 16% along with an additional $620 million of value that would be given up by Uniti. That value equals about one year of rent that Windstream pays to lease Uniti’s infrastructure.

Bloomberg Intelligence noted that the companies have “agreed on most economic terms.” Details from the companies reveal that Uniti will pay Windstream $490 million in cash over the next five years and another $245 million in a future equity offering.

Alongside that, Uniti would make a $1.75 billion capital expenditure commitment to Windstream over the next decade. In total, Uniti would provide nearly $2.5 billion of support to Windstream over the next 10 years.

Uniti, Bloomberg noted in its analysis, made “significant concessions” — including increasing its cash payment to Windstream by $240 million more than it offered in November. The concessions from Uniti, at least, keep Windstream in business and are a “less treacherous path” than forcing a sale of Windstream.

While Windstream appears to be headed toward a cash windfall, the Citi analysis outlined continued revenue erosion at the company through 2021 with revenue flattening or growing slightly thereafter.

Windstream’s owners may not see much immediate benefit from a settlement agreement, Citi noted. “We believe it is almost certain (i.e. 99% likelihood) that Windstream emerges from bankruptcy with a capital structure that affords zero value to current equity owners,” the report said.

Similarly, Bloomberg Intelligence noted that a deal would allow Windstream to exit bankruptcy but keeping a lease arrangement in place could be burdensome to both companies, and the companies’ “tortured lease history may weigh on each’s valuation going forward.”

However, Cowen was more optimistic in its report, writing that “current terms can provide enough for both companies toward a pathway to continue/resume operating in good financial standing.

“While we are not lawyers,” the analysis said, “we believe the idea for two companies to survive and successfully compete in the telco/fiber marketplace goes a long way and potentially trumps underlying bondholder disputes.”

Even if an agreement with Uniti is announced Monday, Windstream still has several hurdles to clear before it hits smooth ground.

First, it has to file a business restructuring plan to emerge from bankruptcy; then that plan must be approved by Drain and the company’s creditors.

Chapter 11 Bankruptcy Code grants Windstream an exclusive period to file an action plan that outlines its restructuring, both on financial and operational issues. Once the plan is filed, the company is given two months to gain approval from creditors and other parties involved in the case.

Drain said Windstream must file its restructuring plan by April 22.

FAMILY DOLLAR CELEBRATES

Family Dollar in North Little Rock has a new look and an expanded selection of products.

The store at 2633 Pike Ave. is holding a grand reopening of the outlet, which will offer $1 merchandise from Dollar Tree, including more food, beauty, household and seasonal items. Family Dollar is a subsidiary of Virginia-based Dollar Tree Inc.

Saturday’s event from 10 a.m.-1 p.m. will feature gift basket raffles, giveaways, free samples and family entertainment. In addition, the first 50 customers through the doors will receive gift cards and reusable shopping bags.

“The refreshed store will provide even greater values and convenience to our shoppers,” company spokesman Jim Van Slyke said.

Family Dollar has about 8,000 stores in 46 states. A year ago, the company announced that it would close up to 390 Family Dollar stores and rebrand about 200 others under the Dollar Tree name.

SUPPORTING FARMERS MARKETS

Applications are due March 2 for farmers markets interested in receiving state support for their operations.

The Arkansas Department of Agriculture and Farm Credit have partnered again for the farmers market promotion grant program, which provides funds to help build community and regional awareness for local markets. Support includes providing signage, times of operation and location details.

Local advertising includes print, radio and television support along with social media campaigns. The program provides assistance of 75% up to $400.

More information and applications are available at agriculture.arkansas.gov.

The partners also are providing branded bags to the local markets. A minimum purchase of 250 bags is required.

VENTURE CENTER ADDS DIRECTOR

Collins Andrews has been named to the Little Rock Venture Center board of directors.

The nine-member board guides the Venture Center in supporting entrepreneurial efforts in Arkansas and around the world.

“I’ve had the opportunity to work with the Venture Center for the past four years through the fintech accelerators, and I’ve essentially been embedded in its day-to-day operations,” Andrews said. “I’ve seen firsthand the organization’s impact, not just on the companies participating in the accelerators, but on our entire community.”

Andrews began his 40-year career as an engineer, and has created a startup manufacturing business and had deep experience with a successful information technology company.

He holds a bachelor’s degree in mechanical engineering from Vanderbilt, graduated from the Stonier Graduate School of Banking at Rutgers University and earned a master’s degree in industrial administration from Purdue University.