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Windstream: Reached Agreements With Creditors, Uniti Group

3 min read

Windstream Holdings Inc. of Little Rock, which has been working through Chapter 11 bankruptcy since February 2019, announced Monday that it has entered into an agreement with its first lien creditors and settled a lease dispute with spinoff Uniti Group Inc. of Little Rock.

The company said the creditor agreement will result in:

  • A substantial reduction of the company’s existing funded debt by more than $4 billion;

  • A substantial reduction of the company’s annual debt service obligations; and

  • Access to exit financing to allow Windstream to pursue its strategic goals after emergence from Chapter 11.

“We are pleased to have reached an agreement with creditors on the terms of a comprehensive financial restructuring that will significantly reduce our debt and strengthen our long-term competitive position,” President and CEO Tony Thomas said in a news release. “This agreement demonstrates our creditors’ confidence in our go-forward business plan and will enable Windstream to work through the financial restructuring process on an expedited basis.”

The company plans to file its Chapter 11 plan of reorganization, with its proposed new capital structure, by the end of March. Windsteam aims to emerge from restructuring mid-year, subject to the timing of court and regulatory approval.

“Our new capital structure will enable continued innovation in vital enterprise-class offerings such as SD-WAN and UCaaS, promote the deployment of on-net solutions, and reinforce our ability to deliver an amazing customer experience supported by a superior digital platform,” Thomas said. “Additionally, our new strategic partnership with Uniti will allow us to expand 1 Gig fiber-based internet service to more than half of our Kinetic broadband footprint over the next several years.”

Windstream pays Uniti about $659 million per year for access to telecommunications infrastructure and other assets that power its business. The agreement resolves the pending litigation between the two companies.

In addition, Uniti will:

  • Invest up to $1.75 billion through 2030 in growth capital improvements for fiber and other assets leased by Windstream;

  • Pay Windstream about $490 million; and 

  • Purchase certain unused and underused fiber assets from Windstream for an additional $285 million.

“Our agreement with Uniti will provide substantial fiber-based network investments for Windstream to significantly expand 1-Gigabit internet service for consumers, positioning the company for sustainable growth and margin expansion upon emergence from restructuring,” Thomas said.

The agreement also includes the following provisions:

  • On the first anniversary of the initial investment for growth capital improvements, the annual base rent payable by Windstream will increase by an amount equal to 8% of such new investment, subject to a 0.5% annual escalator.

  • For growth capital improvements that include fiber deployments in CLEC territories, Uniti will have the option to require that such deployment be engaged in jointly, with Uniti owning and operating any excess new strands deployed beyond Windstream’s forecast. In return, Uniti agrees to fund 50% of the total cost to deploy the CLEC fiber. 

  • Uniti will purchase certain Windstream-owned fiber assets for $40 million.

  • Uniti will sell to certain first lien creditors of Windstream 38.6 million shares of its common stock.

“We are pleased to have achieved a mutually beneficial outcome for both Uniti and Windstream, which has been our stated goal from the beginning,” Uniti President and CEO Kenny Gunderman said. 

“This agreement has substantial strategic value for Uniti as it immediately allows the company to expand its national fiber footprint with approximately 450,000 new fiber strand miles and 1.8 million of existing fiber strand miles that are able to be leased by Uniti to a third party,” he said. “The agreement also provides further expansion in the coming years for additional fiber deployment with our commitment to invest up to $1.75 billion of capital in Uniti-owned, Windstream-leased assets.  

“Approximately 90% of our committed capital as part of the settlement agreement will be used to acquire or build new REIT eligible fiber assets with attractive yields.  We look forward to a strong working relationship with Windstream as we focus on enhancing Windstream’s competitive position and the network Windstream leases from Uniti.”

Copies of both agreements are available here.

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