Windstream accused of defaulting under 6 3/8% notes, denies allegation

By Wendy Van Sickle

Columbus, Ohio, Sept. 25 – Windstream Holdings, Inc.’s direct wholly owned subsidiary, Windstream Services, LLC, said it received a notice dated Sept. 21 from a holder of its 6 3/8% senior notes due 2023 claiming an event of default had occurred under the note indenture, but the company called the allegations “without merit.”

According to an 8-K filing with the Securities and Exchange Commission, the noteholder, who claims to hold more than 25% of the principal amount of the notes, alleged the transfer of certain assets and the subsequent lease of those assets in connection with the spinoff of Communications Sales & Leasing, Inc. [now known as Uniti Group, Inc.] in April 2015 constituted a sale and leaseback transaction and did not comply with the sale and leaseback covenant under the indenture.

However, Windstream said the transactions did not constitute a sale and leaseback transaction and that no default occurred or is continuing to occur under the sale and leaseback indenture.

Further, the company said the notice alleged it violated the indenture’s restricted payment covenant by not delivering an officers’ certificate and that it made a restricted payment in reliance on the restricted payment builder basket while an alleged default was pending, which is prohibited by the indenture. Windstream, however, said it delivered the requisite officers’ certificate and was not in default when it made any restricted payments.

“The allegations in the notice are without merit, and the company believes those allegations are intended to manipulate the prices of the notes and other securities,” the filing states.

“The company is in compliance with all of the covenants under the indenture. The company will vigorously defend against these allegations and pursue all appropriate remedies, including, but not limited to, action(s) against any party alleging default.”

If the alleged default claimed by the noteholder is not cured by 60 days after the date the notice was received [Sept. 22] or not waived by holders representing a majority of the aggregate principal amount of the notes, the noteholder or the trustee may allege that an event of default has occurred under the indenture.

An occurrence of an event of default would permit the trustee or holders of at least 25% of the outstanding principal amount of the notes to declare the principal amount of all outstanding notes to be immediately due and payable.

The noteholder is prohibited from pursuing a remedy against the company until the noteholder (i) provides the trustee with written notice of a continuing event of default, (ii) requests the trustee to pursue a remedy, (iii) offers the trustee an indemnity satisfactory to the trustee against any costs, liability or expense and (iv) the trustee does not comply with the request within 60 days after receipt of the request and offer of indemnity, and (v) during such 60-day period, the holders of a majority in aggregate principal amount of outstanding notes do not give the trustee a direction inconsistent with the request.

If an event of default is determined to have occurred under the note indenture, it could also constitute an event of default under the company’s July 2006 credit agreement with JPMorgan Chase Bank, NA as administrative agent as well as under the company’s other senior notes.

Windstream is a Little Rock, Ark.-based provider of communications and technology solutions.

© 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.