Windstream said it has reached a settlement with network operator Uniti, thanks to mediation. The settlement resolves all claims asserted against Uniti, including all litigation brought by Windstream and certain of its creditors in the context of its bankruptcy. The settlement has the support of most of Windstream’s lenders including Elliott Management, its largest creditor. It still has to be made definitive and receive certain regulatory approvals and conditions, including bankruptcy court approval and Uniti’s US federal income tax compliance. Still, all litigation will be stayed until the document is made definitive.
Under the settlement, Uniti will invest up to USD 1.75 in growth capital improvements. Windstream will meanwhile transfer to Uniti certain dark fibre rights of use, for operations that currently generate USD 21 million in annual EBITDA, and relinquish its right to use 1.8 million fibre strand miles it is currently leasing. Uniti will buy certain Windstream-owned fibre assets for USD 40 million. Some of the assets generate about USD 8 million in annual EBITDA while others include 0.4 million fibre strand miles covering 4,100 route miles. Uniti will, finally, sell 38.6 million shares to some Windstream creditors.
Uniti CEO Kenny Gunderman said that with the settlement, the company will immediately be able to expand its national fibre footprint. About 450,000 new fibre miles will be added and 1.8 million fibre miled leased by Uniti to a third party. The agreement also provides further expansion in the coming years for additional fibre deployment, with the commitment to invest up to USD 1.75 billion of capital in Uniti-owned, Windstream-leased assets. The CEO said that about 90 percent of the committed capital will be used to acquire or build new REIT eligible fibre 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,” Gunderman said.
Windstream CEO Tony Thomas said the agreement will provide the company with “substantial” fibre-based network investments. This means Windstream will be able to “significantly” expand its 1 Gigabit internet service, positioning the company for sustainable growth and margin expansion upon emergence from restructuring. “Our goal remains to emerge from restructuring as soon as possible under the best possible terms for Windstream and all our stakeholders” Thomas said.
The case started in 2019, when a New York court ruled against Winstream, regarding the 2015 spinoff of some of its telecom network assets into an independent, publicly traded real estate investment trust (REIT). The transaction was challenged by some bondholders, who said the spinoff was invalid under agreements reached between the company and its debt holders. Bloomberg said the case really revolved around the sale of the Uniti Group, with the bond holders believing they had been unfairly stripped of assets that backed up their investments. The ruled made Windstream seek bankruptcy protection.
Windstream noted now that it voluntarily filed for Chapter 11 reorganisation in the US Bankruptcy Court for the Southern District of New York on 25 February 2019. The company added that it is operating normally during the financial restructuring process.
Windstream added that the deal will reduce its debt by over USD 4 billion and considerably reduce service obligations.
