Windstream Holdings files plan; disclosure statement hearing May 7

By Caroline Salls

Pittsburgh, April 2 – Windstream Holdings, Inc. filed a plan of reorganization and related disclosure statement Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Windstream and Uniti Group Inc. announced on March 2 that mediation culminated in an agreement in principle to resolve claims and causes of action.

The settlement is also supported by some holders of Windstream’s outstanding first-lien debt and its second-lien creditors and unsecured noteholders, including affiliates of largest creditor Elliott Management Corp. and other members of an informal first-lien Windstream creditors group.

Under the settlement, Uniti will invest up to $1.75 billion in growth capital improvements over the initial term of new leases.

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

Windstream will transfer to Uniti dark fiber indefeasible rights of use (IRU) contracts that currently generate $21 million in annual EBITDA and relinquish its rights to use 1.8 million fiber strand miles.

Uniti will purchase for $40 million some Windstream-owned fiber assets, including fiber IRU contracts generating $8 million of annual EBITDA and 0.4 million fiber strand miles.

Windstream and Uniti agree to bifurcate their master lease into two structurally similar agreements to govern Windstream’s ILEC and CLEC facilities, respectively. Parties to the new leases include Windstream Holdings, Inc., Windstream Services, LLC and some of its subsidiaries and/or newly formed affiliated entities.

Total consideration to Windstream from Uniti, exclusive of the $40 million purchase price, will consist of $400 million in consideration paid in quarterly cash installments over five years, at an annual interest rate of 9%, which may be fully paid after one year, resulting in total payments ranging from $432 million to $490 million; and $244.5 million of proceeds from, and conditioned upon, the sale of Uniti’s stock to creditors of Windstream.

Uniti will sell to first-lien creditors of Windstream 38,633,470 shares of Uniti common stock at a price of $6.33 per share. Some recipients of the settlement common stock will be subject to a one-year lock up, and all recipients will be subject to a customary standstill agreement.

In addition, Windstream and some of its creditors entered into a plan of reorganization support agreement.

Backstop commitment

On March 13, Windstream requested court approval to enter into a rights offering backstop commitment agreement.

Under the backstop agreement, holders of first-lien claims against the Windstream debtors will receive a cash paydown with proceeds from up to $2.4 billion in new exit financing and a $750 million equity rights offering backstopped by Elliott Investment Management and some members of a first-lien debtholders group.

In return for this commitment, the backstop parties will receive at 8% premium payable in new common stock.

Creditor treatment

Under the plan, holders of first-lien claims will receive a share of 100% of the reorganized Windstream equity interests, subject to dilution on account of the rights offering, the backstop premium and a management incentive plan, as well as cash equal to the sum of distributable exit facility proceeds, distributable flex proceeds, rights offering cash proceeds and all other cash held by the company on the effective date in excess of a minimum cash balance. These creditors will also receive subscription rights and, as applicable, first-lien replacement term loans.

Holders of Midwest notes cl aims will receive a share of $100 million in exit facility term loans, plus any interests and fees due under the notes indenture and/or the final debtor-in-possession financing order.

If holders of second-lien claims and obligor general unsecured claims vote to accept the plan, they will receive cash equal to $0.00125 for each $1.00 of claims. If they vote to reject the plan, they will be treated in line with section 1129(a)(7) of the Bankruptcy Code.

Holders of other secured claims will be paid in full in cash or receive the collateral securing the claims, or the claims will be reinstated.

Non-obligor general unsecured claims will be reinstated or paid in full in cash.

Existing interests will be cancelled without any distribution to holders.

The disclosure statement hearing is scheduled for May 7.

Windstream is a Little Rock, Ark., telecommunications provider. The company filed bankruptcy on Feb. 25, 2019 under Chapter 11 case number 19-22312.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.