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Windstream Holdings Inc. of Little Rock filed a Chapter 11 bankruptcy on Monday, less than two weeks after a federal court judge concluded that the split of its fiber and copper assets in 2015 to the benefit of of a separate company was in breach of covenants, which exposed it to $ 310 million judgment.
In a press release, CEO Tony Thomas said the reorganization was "a necessary step to mitigate the financial impact" of the judge's decision and "the impact it would have on consumers and businesses in the states in which we operate. "
"By taking this proactive step, we will ensure that Windstream has access to the capital and resources we need to continue to leverage Windstream's strong operational momentum while engaging in constructive discussions with our creditors about the terms and conditions of Windstream. A plan for consensual reorganization, "Thomas said. "We have taken decisive action to ensure Windstream's long-term financial stability, and we are confident that once the reorganization process is completed, we will be in a better position to invest in our business, increase our speed and capabilities for our businesses. customers and be competitive for the long term. "
Thomas said the court's approval of a reorganization plan will allow the company to continue paying its employees and maintain relationships with suppliers, business partners and customers. Citigroup Global Markets Inc. is committed to providing $ 1 billion in financing to the debtor-operator that would help it meet its operational needs.
The company said it would have more information on a website created for the restructuring. He filed the bankruptcy petitions in the US Bankruptcy Court for the Southern District of New York.
More: See the bankruptcy filing in Chapter 11 of Windstream.
Windstream's shares (Nasdaq: WIN), which had already declined since the judge's decision, dropped from around 25% Monday to around 65 cents a share. Windstream, which is itself a spin-off of the former Alltel Corp. of Little Rock, employs approximately 13,000 people across the company, including approximately 1,200 in Arkansas, and provides business telecommunications and network services, as well as consumer broadband Internet entertainment services to consumers . She announced a loss of $ 2.1 billion on a turnover of $ 5.8 billion in 2017 and a loss of $ 173.8 million on revenues of $ 4.3 billion in during the first three quarters of 2018.
Last week, in light of the court decision, Windstream postponed its financial results for the fourth quarter and fiscal year 2018, originally scheduled for February 21. She announced that she would publish the results "no later than March 18".
The February 15 decision of US District Court Judge Jesse Furman was issued as part of a lawsuit by Aurelius Capital Management in New York that Windstream's 2015 split of its copper assets and fiber in a real estate investment trust violated some of its bonds bonds.
The spin-off is Uniti Group Inc. of Little Rock, a publicly traded company, led by CEO Kenny Gunderman and initially called Communication Sales & Leasing Inc. Uniti shares (Nasdaq: UNIT) rose more than 11% on Monday at $ 10.29 per share.
Windstream's executives had expressed confidence in the midst of legal disputes, but had also warned that if the court found it to be in technical default on the bonds, it could be required to immediately repay the creditors or be forced into bankruptcy.
In its legal documents, Windstream alleged that Aurelius had acquired its position "as bondholders" for the sole purpose of seeking to fabricate this alleged defect and to declare that a credit event it was produced or was occurring in order to collect a credit default swap payment. "
In comments after the ruling, Thomas said the company was "disappointed" and "frankly surprised" and said the executives would pursue "all available options, including post-trial motions and an appeal." He also said that the cabinet would also work with creditors the next day. " course of action.
Aurelius issued his own response to the ruling, saying Windstream could have "easily" avoided the result "first by not playing fast with its ticket holders in 2015" and "second by settling.
"Instead, Windstream wasted an exorbitant amount – more than what would have been needed to settle with us at the time – on an ineffective exchange offer, and then on a litigation," Aurelius said. . "In our opinion, a management and board of directors with an extreme and unjustified assessment of Windstream's legal case have chosen to bet on the company.The company has lost."
Announcing the bankruptcy filing on Monday, Thomas pointed out that it was not "operational failures" that forced chapter 11, and that Aurelius "has been engaged in predatory market manipulation to improve its performance. own financial situation ".
"Even though it is unfortunate that Aurelius has used this tactic to improve its returns at Windstream's expense, we look forward to continuing the process of financial restructuring to ensure a sustainable capital structure in order to maintain our position. strong operational performance and continue to serve our customers for many years to come, "said Thomas.
Thomas, whose contract as CEO was extended Friday to 2024, discussed the split of Uniti during a speech to the Rotary Club of Little Rock in 2016, while Windstream celebrated its 10th anniversary. He added that the spinoffs of the operation had allowed Windstream to repay $ 800 million of debt and improve its infrastructure.
"The idea sounds a bit crazy the first 12 times you hear it, but the 13th is a compelling way to create value for our shareholders but also for our customers," he said. said Thomas.
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