Windstream Holdings filed for Chapter 11 Bankruptcy on Monday after it lost a $310 million court battle with Aurelius Capital Management, which had claimed the company defaulted on bonds when it spun off Uniti Group.
Windstream’s stock dropped 47 percent down to 45 cents after the news broke, while Uniti Group’s stock rose almost 15 percent to $10. 76. If the bankruptcy proceeding allows Windstream to survive, it would be a big plus for Uniti, because Windstream is Uniti’s largest customer.
Windstream has received $1 billion in financing from Citigroup to fund its reorganization. The company will continue to operate its business as usual without interruption to its customer relationships and may appeal the court’s decision.
On February 15, 2019, Judge Jesse Furman, U.S. District of the Southern District of New York, ruled that Windstream Services’ 2015 spinoff of telecom network assets into a real estate investment trust violated its agreements with bondholders. The court case came from challenges by Aurelius Capital Management and U.S. Bank National Association, which argued that the spinoff was invalid under the terms of the bond agreements.
“Windstream strongly disagrees with Judge Furman’s decision,” said Tony Thomas, president and CEO of Windstream. “The company believes that Aurelius engaged in predatory market manipulation to advance its own financial position through credit default swaps at the expense of many thousands of shareholders, lenders, employees, customers, vendors and business partners. Windstream stands by its decision to defend itself and try to block Aurelius’ tactics in court. The time is well-past for regulators to carefully examine the ramifications of an unregulated credit default swap marketplace.”
Last Friday, Windstream showed confidence in Thomas extending his contract to 2024 with $2 million lump sum payment and $1 million annually thereafter.