Windstream, a provider of Internet services in predominantly rural areas, has filed for bankruptcy.
The bankruptcy was triggered by a February 15 court decision that could cost Windstream hundreds of millions of dollars. The company said bankruptcy would help prevent negative consequences for customers.
Windstream filed applications for reorganization under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court of the Southern District of New York in the United States. Windstream has considered other options, including an appeal of the court decision, but the company's management and board of directors "have determined that the filing of an application for voluntary protection in under Chapter 11 was a necessary step to deal with the financial consequences of the judge [Jesse] Furman's decision and its impact on consumers and businesses in the states in which we operate, "Windstream CEO Tony Thomas said in the bankruptcy announcement.
Windstream's lost judicial battle was directed against the Aurelius Capital Management hedge fund, "which had claimed that two years earlier, the company's fiber optic cable network had been violated, violating the terms of one of the its obligations ", which prohibited" sale and leaseback transactions ". The Wall Street Journal writes today.
"Two weeks ago, US District Judge Jesse Furman declared that Windstream had violated the sale-leaseback pact and awarded the hedge fund a judgment of $ 310 million plus interest," the company said. President Newspaper wrote. "The battle highlights a growing practice among hedge funds of looking for cases in which a company breached debt covenants, even if the issuer is healthy enough to continue to manage and refinance its debt. debt."
Windstream has a debt of $ 5.6 billion and "has been losing residential and commercial customers to cable and wireless companies for years," he added. Newspaper it's noted.
Despite the choice not to appeal, CEO Thomas said that "Windstream strongly disagreed" with the court's ruling, and accused Aurelius of "engaging".[ing] in predatory market manipulations to improve one's own financial situation. "
"Windstream has not arrived at Chapter 11 due to operational failures and currently does not foresee the need to restructure major operations," Thomas said. "It is unfortunate that Aurelius has used this tactic to advance its returns at Windstream's expense. We look forward to continuing the process of financial restructuring to put in place a sustainable capital structure that will allow us to maintain our strong performance." operational and continue to serve our customers for many years. "Thomas called for government regulation of the" unregulated credit default swap market ".
Windstream receiving federal funding
Windstream had 1,015,000 residential Internet customers as of September 30, 2018, down 2,400 from the previous year, according to a results report. Windstream also offers a television and telephony service. Windstream, which also sells network services to businesses and businesses, reported revenue of $ 1.42 billion and net income of $ 41 million in the third quarter of 2018. Windstream's revenue decreased by 5% compared to the previous year, but its quarterly profit $ 102 million the previous year.
The Federal Communications Commission today issued a statement on bankruptcy, saying "pleased that Windstream has made it clear that its reorganization in bankruptcy would not disrupt service to any consumer."
Since 2015, Windstream has received $ 175 million annually from FCC to provide Internet service to an additional 405,000 homes and businesses. Under the terms of this agreement, Windstream is scheduled to complete its deployment by the end of 2020.
For Kris Monteith, head of FCC's Wired Service Competition Bureau, "we must remain vigilant in the light of these events to ensure that 911 service, which saves lives, as well as voice and broadband on which Windstream customers depend – remain, and that the federal funds received by Windstream through the Connect America Fund and other universal service programs, they are used appropriately to connect the Americans to the areas rural and low-income broadband. "
Windstream announced today that it has secured a $ 1 billion commitment from Citigroup Global Markets. "With the approval of the Court, we will continue to pay our employees, maintain our relationships with our suppliers and business partners and serve our customers as usual," said Thomas. "We remain committed to providing essential voice and data services and ensuring our customers get the most out of the transition to next-generation technology solutions and high-end broadband services."
Windstream offers Gigabit fiber Internet access to homes and small businesses in some areas, but its DSL offerings do not comply with modern broadband standards. The latest FCC report, Measuring Broadband America, analyzed Windstream offerings with announced download speeds of between 3 and 12 Mbps. It announced download speeds of between 384 kbps and 1.5 Mbps. Windstream's actual median speeds were lower than advertised rates, according to the September 2017 FCC measurements.
In 2015, we wrote about Windstream asking $ 383,500 from a potential Nebraska customer for the extension of fiber optics just a few miles from their business. The customer found another ISP at $ 42,000.
Windstream provides residential services in 18 states, namely Alabama, Arkansas, Florida, Georgia, Iowa, Kentucky, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina South and Texas.