Cloud and Network Provider Windstream Files for Chapter 11 Bankruptcy

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Windstream

Windstream, a provider of voice and data network communications, cloud hosting, and managed services, has filed for bankruptcy. The Chapter 11 bankruptcy comes after a $310 million court loss against a hedge fund.

Windstream intends to use the court-supervised process to address debt maturities that have been accelerated as a result of the recent decision by Judge Jesse Furman in the Southern District of New York against Windstream Services, LLC, a subsidiary of the Company.

“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,” said Tony Thomas, president and chief executive officer (CEO) of Windstream. “Taking this proactive step will ensure that Windstream has access to the capital and resources we need to continue building on Windstream’s strong operational momentum while we engage in constructive discussions with our creditors regarding the terms of a consensual plan of reorganization. We acted decisively to secure the long-term financial stability of Windstream, and we are confident that, upon completion of the reorganization process, we will be even better positioned to invest in our business, expand our speed and capabilities for our customers and compete for the long term.

Business as Usual

Windstream has received a commitment from Citigroup Global Markets Inc. for $1 billion in debtor-in-possession financing. Following approval by the Court, this financing, combined with access to the cash generated by Windstream’s ongoing operations, would be available to meet Windstream’s operational needs and continue operating its business as usual.

“I want to express my appreciation for the continued focus of the entire Windstream team as well as the loyalty and patience of our customers, vendors, channel partners and other stakeholders,” added Mr. Thomas. “With approval from the Court, we will continue paying our employees, maintaining our relationships with our vendors and business partners and serving our customers as usual. We remain committed to providing critical voice and data services and ensuring customers realize the maximum benefit in transitioning to next-generation technology solutions and premium broadband services.”

In conjunction with the filing, Windstream has filed a number of customary first day motions. These motions would allow Windstream to continue to operate in the normal course of business without interruption or disruption to its relationships with its customers, vendors, channel partners and employees. Windstream expects to receive Court approval for these requests and intends to pay vendors in full for all goods received and services provided to Windstream after the filing date.

Judge Jesse Furman’s Decision

Judge Furman ruled that Windstream Services, LLC’s 2015 spinoff of certain telecommunications network assets into a real estate investment trust (REIT) violated its agreements with bondholders. The decision arose from challenges by Aurelius Capital Management and U.S. Bank National Association that the spinoff was invalid under the terms of those agreements.

“Windstream strongly disagrees with Judge Furman’s decision,” added Mr. Thomas. “We believe 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. Windstream stands by its decision to defend itself and try to block Aurelius’ tactics in Court. The time is well-past for regulators to carefully examine the ramifications of an unregulated credit default swap marketplace.”

“Windstream did not arrive in Chapter 11 due to operational failures and currently does not anticipate the need to restructure material operations,” added Thomas. “While it is unfortunate that Aurelius engaged in these tactics to advance its returns at the expense of Windstream, we look forward to working through the financial restructuring process to secure a sustainable capital structure so we can maintain our strong operational performance and continue serving our customers for many years to come.”

Information for Stakeholders

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: www.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 at: www.kccllc.net/windstream.

Kirkland & Ellis LLP is serving as legal counsel, PJT Partners LP is serving as financial adviser and Alvarez & Marsal is serving as restructuring adviser to Windstream.

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