It looks like all systems are go for Windstream to emerge from Chapter 11 bankruptcy in late August after a judge confirmed its restructuring plan.
After hearing testimony for close to two days, Judge Robert Drain, of the U.S. Bankruptcy Court for the Southern District of New York, confirmed Windstream's plan for reorganization Thursday afternoon. Windstream expects to complete the financial restructuring process and then emerge as a privately-held company in late August.
The company's reorganization plan allows Windstream to trim its debt by more than $4 billion and reorganize its governance, which includes naming some of its creditors to seats on the company's new board of directors. The reorganization plan eliminated junior bondholders who were owed close to $2.4 billion, converted some senior debt to equity and made Elliott Management Windstream's largest shareholder.
“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," said Windstream Holdings CEO and President Tony Thomas, in a prepared statement. "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. 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.”
It has been a long, and sometimes bitter, road to the end of Chapter 11 bankruptcy for Windstream. It has operated under the cloud of Chapter 11 bankruptcy since February of last year after it lost a legal battle with New York hedge fund Aurelius Capital Management over whether Windstream had defaulted on bonds by spinning off the Uniti Group four years ago.
As part of that spinoff, Windstream transferred copper-based network assets to Uniti, which Windstream leased back from Uniti to serve its 1.4 million residential and business customers across its 18-state footprint. Windstream was paying $54 million per month to Uniti for access to Uniti's network assets.
The master lease with Uniti was set to expire in 2030, and had an annual rent of approximately $659 million. Windstream filed a complaint against Uniti on July 25 that sought to re-characterize its relationship with Uniti from a lease to a financing arrangement.
For months, Windstream and Uniti couldn't come to an agreement on the terms of the master lease and were headed to a court date earlier this year before agreeing to new terms in early March. Windstream's plan for ditching Chapter 11 received a boost in May when Judge Drain approved Windstream's settlement agreement with Uniti Group.
Along with announcing it had reached an agreement with Uniti, Windstream announced at the same time it had negotiated a proposal with hedge-fund manager Elliott and other investors to buy most of Windstream's equity out of bankruptcy while also removing a large chunk of its debt.
Prior to the March agreements, Windstream was saddled with between $5.6 billion and $5.8 billion of debt.
Among the settlement terms in March, Uniti agreed to invest up to $1.75 billion in growth capital improvements, including "long-term fiber" and related assets in certain Windstream CLEC and ILEC properties over the initial term of the new leases.
Thomas previously said on an earnings call that Windstream would use some of that investment to deliver 1 Gig internet speed to approximately half of its Kinetic broadband footprint that serves consumers and small businesses.
Uniti will also pay Windstream approximately $490 million and buy certain unused and underutilized dark fiber assets from Windstream for an additional $285 million
On the other side of the settlement coin, Windstream will transfer certain dark fiber indefeasible rights of use (IRU) rights of contract, which currently generate about $21 million in annual EBITDA, and its rights to use 1.8 million fiber strand miles currently leased by Windstream that are either unutilized or utilized for the dark fiber IRUs being transferred.