Windstream to distribute 80% of REIT ownership to shareholders

Windstream has taken another step forward with its real estate investment trust (REIT) structure by announcing that it will retain 19.9 percent of the shares in the REIT and distribute the remaining 80.1 percent to Windstream stockholders.

The telco said that the retained shares will be sold opportunistically during a 12-month period following the spinoff, subject to market conditions, with the net proceeds used to retire debt.

"This refined structure allows Windstream to reach our leverage goals faster to strengthen our competitive position, which we believe is appropriate and prudent given the fast changing telecom industry and rapidly evolving customer needs," said Windstream's President and CEO Tony Thomas in a release. "By improving Windstream's credit profile, the REIT benefits from having a financially stronger anchor tenant and retains the financial flexibility to grow and return capital to its shareholders."

In addition, Windstream plans to hold a special stockholder meeting on Feb. 20 in conjunction with the REIT spinoff to approve a 1-for-6 reverse stock split and an amendment to the certificate of incorporation of Windstream Corporation, a subsidiary of Windstream Holdings, that it said will facilitate the conversion of Windstream Corporation into a limited liability company (LLC).

Windstream said that without the LLC conversion, it would incur a tax liability of approximately $600 million to $800 million, based on current estimates, at Windstream Holdings that would be triggered upon execution of the spinoff.

The service provider announced in July that it would spin off a number of its copper and fiber assets into a REIT, a move it said would enable it to lower debt by nearly $3.2 billion while accelerating its broadband and IP-based network transitions.

Since Windstream announced its REIT structure, a number of the other large telcos such as AT&T (NYSE: T), CenturyLink (NYSE: CTL) and Verizon (NYSE: VZ) have been continually asked whether they would consider a similar transition, but all have mainly said they will continue to watch how Windstream fares.

Stewart Ewing, CFO of CenturyLink, told investors during the recent UBS conference that the company will examine all options, including REITs going forward.

"We will continue to observe what happens with Windstream with their REIT process and how their REIT trades after they split the company and make a decision down the road after we get some experience with that," Ewing said. "While we're happy where we are today, it does not prevent us from continuing to look at opportunity for other structures should they be more advantageous from a shareholder perspective."

Besides the REIT structure, Windstream is going through an overall transition. Just last Friday, Jeff Gardner, CEO and president, resigned from his post, which has been assumed by Thomas, who served as the president of the company's REIT and former CFO.

For more:
- see the release

Editor's Corner: Will AT&T, Verizon follow Windstream down the REIT asset path?

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