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Windstream Details REIT Stock Structure, Plans Special Meeting

2 min read

Windstream Holdings Inc. of Little Rock said Thursday that the company will retain 19.9 percent of the shares of its future real estate investment trust spinoff, with the remaining shares going to Windstream stockholders.

In the first presentation to investors since the announcement that CEO Jeffery Gardner resigned and was replaced by Tony Thomas, the company also said it would hold a special stockholders meeting on Feb. 20. 

Thomas, who had been chosen to lead the REIT before being named Gardner’s successor, also extended the timeline for the spinoff, now expected to be complete by the first half of 2015. When the company announced plans for the REIT in July, it expect to complete it by the first quarter.

At the February meeting, shareholders will be asked to approve a 1-for-6 reverse stock split and an amendment to subsidiary Windstream Corp.’s certificate of incorporation, which will convert Windstream Corp. into a limited liability company.

The conversion to an LLC will prevent the company from incurring a tax liability of $600 million to $800 million, the company said.

Windstream plans to sell off its shares of the new company over a 12-month period and use the proceeds to pay off debt. The structure is expected to cut the company’s debt by $4 billion.

Thomas told investors that Windstream’s increased ownership in the spinoff would improve the financial position of both companies.

“While the new structure results in fewer [spinoff company] shares being distributed to shareholders, the monetization of retained ownership interest enables greater Windstream debt reduction, having the effect of increasing Windstream’s value and maximizing the combined value for our shareholders,” Thomas said.

The company also announced the name for the new spinoff: Communications Sales & Leasing Inc.

Thomas told investors that  Francis X. “Skip” Frantz, who will be chairman of the REIT’s board, had already begun the search for the REIT’s president and CEO.

“We anticipate completing all necessary steps, including obtaining the shareholder approval, appointing the management team and closing the transaction in the first half of 2015,” Thomas said.

In a news release before the investor presentation, Thomas said that he and board were focused on completing the spinoff, which he called a “strategic priority.”

“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,” Thomas said in the news 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.”

Shares of Windstream (Nasdaq: WIN) were trading down about 1.7 percent to $8.74 on Thursday morning.

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