Windstream company reps say Chapter 11 filing won't halt service
Despite a Feb. 25 filing for voluntary reorganization under Chapter 11 of the federal bankruptcy code, there will be no change in services to Windstream customers, said Scott Morris, Senior Advisor, Corporate Affairs for Windstream.
“We’re not going out of business. We will continue to serve our customers and meet all of our commitments, including customer appointments and broadband deployments,” Morris said.
The $310 million-plus judgement against Windstream comes as a result of a suit filed by Aurelius Capital Management (Aurelius), which purchased bonds from a Windstream spin-off company in 2017.
In 2015, Windstream put its copper, cable and fiber assets into a real estate investment trust (REIT) it created and named Uniti. The move was approved by the IRS, Securities and Exchange Commission and several states that were involved, Morris said.
Uniti was completely separate from Windstream. It had its own board of directors and was publicly traded on the stock market as UNIT.
“This enabled Windstream to reduce its debt and increase its investments. None of Windstream’s bond holders objected in 2015,” Morris said.
Aurelius, “a predatory hedge fund,” Morris said, purchased some of Windstream’s bonds in 2017. Aurelius then alleged the spin-off “violated terms of the bond agreements and Windstream had defaulted on the bonds, and they demanded payment.”
“The company believes that Aurelius engaged in predatory market manipulation to advance its own financial position through credit default swaps at the expense of many thousands of shareholders, lenders, employees, customers, vendors and business partners,” Tony Thomas, president and chief executive officer of Windstream stated in a press release.
Windstream challenged Aurelius in U.S. District Court, Southern District, but Judge Jesse Furman ruled against Windstream Feb. 15. Windstream was ordered to pay $310 million-plus to Aurelius, plus interest for each day since the trial in July.
“The judge did not say the spin-off was illegal—no one said that,” Morris said. “It was a contractual matter, and Windstream disagrees, but voluntarily filed for Chapter 11 protection.”
“Following a comprehensive review of our options, including an appeal, the Board of Directors and management team determined that filing for voluntary Chapter 11 protection is a necessary step to address the financial impact of Judge Furman’s decision and the impact it would have on consumers and businesses across the states in which we operate,” Thomas stated.
The Chapter 11 filing, approved by the court Feb. 26, allows the company to reorganize financially through a court-supervised process while it continues to operate. Windstream is able to continue to pay employees, vendors and creditors and continue investment thanks to a commitment from Citigroup Global Markets, Inc. of $1 billion in financing. Of that $1 billion, $400 million is available to meet Windstream’s operational needs, including commitments to provide broadband to rural Georgia and other states through the federally funded Connect America Fund.
“Despite it’s bankruptcy status, the burden of Windstream’s financial problems cannot fall on the shoulders of taxpayers who depend on their services to access the Internet” said 9th District Rep. Doug Collins in a press release concerning the bankruptcy filing. “Windstream must continue to meet its obligations under the Connect America Fund to provide broadband service to rural communities like northeast Georgia.”
“We have been in compliance with all the milestones and requirements and we will continue to be throughout the court supervised process,” Morris said.“Our customers will see no change as a result of the Chapter 11 process. Our operations are solid. This is a financial reorganization, for an operational one. We expect to emerge from Chapter 11 with less debt and a stronger balance sheet.”
Collins’ press release stated he believes “increased competition spurs improvement.” He has introduced legislation to hold providers accountable for federal funds, and has been in touch with Thomas on several occasions concerning complaints from North Georgia constituents about Windstream service.
Poor service and lengthy response times to outages has also been on State Sen. Steve Gooch’s radar for a number of years. He headed up a broadband study committee in 2016 and introduced several Senate bills as a result of the findings. His latest bill, SB 66, unanimously passed Feb. 25 and is now in the House. The bill, known at the “Streamlining Wireless Facilities and Antennas Act,” would implement a standard application process for 5G companies to co-locate small wireless antennas on existing or new poles.
“With the growing demand for internet access for purposes greater than entertainment, this bill, which similar legislation has already been passed in 22 other states, will ensure that we do not fall behind in meeting the needs of Georgians,” Gooch stated.
Additional resources for customers, vendors and other stakeholders, and other information on Windstream’s filings, can be accessed by visiting Windstream’s restructuring website at windstreamrestructuring.com. Court filings and other documents related to the Chapter 11 process are available on a separate website administered by Windstream’s claims agent, Kurtzman Carson Consultants LLC (“KCC”) at kccllc.net/windstream. Information is also available by calling 877-759-8815 (toll-free in the U.S.) or +1-424-236-7262 (for parties outside the U.S.).