Windstream Lays Out Bankruptcy Exit with Uniti Lease Deal

(Bloomberg) -- Windstream Holdings Inc. settled the dispute over its lease of Uniti Group Inc.’s telecom network, paving the way for the phone and broadband provider to get out of bankruptcy at midyear.

Uniti, the real estate investment trust that Windstream created in 2015 by spinning off its landline assets, agreed to give Windstream $1.75 billion in capital improvement over 10 years, $490 million in cash and $285 million for the purchase of unused and underutilized fiber, according to a statement. The terms are similar to what had been previously disclosed.

Uniti’s bonds rallied on the settlement, with its 8.25% notes due October 2023 gaining 4 cents on the dollar to 97.5 cents. The debt yields about 9%. Its shares slipped as much as 3.8% to $9.39.

The settlement allows Windstream and Uniti to avoid a trial over the master lease dispute that was scheduled to begin March 3. Windstream said its $650-million-a-year lease to use Uniti’s network assets was overvalued, and sought to have it reclassified as an unsecured financing deal, giving Uniti less priority for payment and thus improving recoveries for other unsecured creditors.

“The trial that was supposed to take place remained a risky bet for both sides. It was clearly going to be a fact-intensive inquiry with no clear winners,” said Negisa Balluku, Bloomberg Intelligence’s litigation analyst. “It was no surprise that it concluded this way.”

Creditor Agreement

Uniti’s final cash and stock offer were significantly improved compared to what was initially disclosed in November, she said. The REIT initially offered $100 million in cash and no stock to settle the dispute.

Separately, Windstream reached an agreement with its first-lien creditors on a restructuring plan that would cut more than $4 billion from the $5.8 billion debt load at the time it filed for bankruptcy. A reorganization plan will be filed by the end of March, and the company expects to emerge from bankruptcy mid-year, Windstream said.

“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,” Tony Thomas, chief executive officer of Windstream, said in a statement.

Windstream is required to secure bankruptcy court approval of the settlement by April 6, and expects to emerge from bankruptcy by August 29, 2020, according to a Uniti filing.

Windstream filed for bankruptcy in early 2019 after Aurelius Capital Management LP alleged that the 2015 spinoff and the lease agreement that created Uniti violated the terms of Windstream’s bonds. A federal court agreed.

After the bankruptcy filing, the 15-year lease agreement with Uniti became a major focus of the bankruptcy case, with Windstream creditors pressuring the telecom company to get a better deal.

The bankruptcy case is Windstream Holdings Inc., 19-22312, U.S. Bankruptcy Court, Southern District of New York (White Plains).

To contact the reporter on this story: Allison McNeely in New York at amcneely@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Nicole Bullock, Dawn McCarty

©2020 Bloomberg L.P.