US fixed line operator Windstream has announced that it has filed voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Southern District of New York. The company 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 its subsidiary, Windstream Services (see below).
On 15 February 2019 Judge Furman ruled that Windstream Services’ 2015 spin-off of certain telecoms network assets into a real estate investment trust (REIT) violated its agreements with bondholders. The decision arose from challenges by Aurelius Capital Management and US Bank National Association that the spin-off was invalid under the terms of those agreements.
Windstream president and CEO Tony Thomas commented: ‘Windstream strongly disagrees with Judge Furman’s decision. 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. 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.’