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Windstream Contemplates Bankruptcy PDF Print E-mail
Wednesday, 20 February 2019 09:15

The fate of Windstream Holdings Inc. was cast into doubt after a court ruled that the rural phone company defaulted on its bonds in 2015 by spinning off Uniti Group Inc. Windstream shares fell as much as 43 percent in extended trading.

The ruling on February 15 in Manhattan federal court is a victory for New York hedge fund Aurelius Capital Management LP, which contends that the deal unfairly stripped bondholders of assets that back up their investment. Windstream, which serves about 1.4 million consumers and small businesses in 18 states, has warned that a defeat could force it to seek bankruptcy protection or liquidation.

“Actions by the company’s Windstream Services unit breached covenants of bonds it issued, and Aurelius is entitled to a $310 million judgment,” Judge Jesse Furman said in the decision. Little Rock, Arkansas-based Windstream said in a statement that it was pursuing options including an appeal.

“We are disappointed in, and frankly surprised by, the ruling and will be taking immediate steps to pursue all available options, including post-trial motions and an appeal,” Tony Thomas, Windstream’s president and chief executive officer, said in the statement.

Representatives for Uniti and Aurelius didn’t respond to messages seeking comment. Uniti’s shares also fell more than 20 percent in late trading.

With the company looking to appeal “any consequences are unlikely to happen in the very near term,” said Matthew Dolgin, an analyst who follows Windstream for Morningstar Inc. “If the verdict was upheld throughout all potential appeals, we think there is a reasonable probability that Windstream would be forced into bankruptcy.” Customers probably won’t notice major effects, with the company more likely to reorganize than liquidate, Dolgin said.

Furman also dismissed Windstream’s counterclaims against Aurelius, saying that the company’s “financial maneuvers — and many of its arguments here — are too cute by half.”