Windstream Gets Access to $400 Million in Bankruptcy Financing

Broadband and telecom provider Windstream has gotten the OK from bankruptcy court to access "up to $400 million of its $1 billion in debtor-in-possession (“DIP”) financing" so it can continue "business as usual" while it reorganizes under Chapter 11.

Among that usual business is apparently bidding in the FCC's millimeter wave spectrum (24 GHz) in the FCC auction that starts March 14. At least it is a qualified bidder and has provided an upfront payment to the FCC as of Feb. 19.

A Windstream spokesperson had not returned a call for comment at press time about whether and how the bankruptcy might impact its bidding on the spectrum, which is being freed up for 5G. The company had said when announcing it was reorganizing -- following a court decision that didn't go its way (a bondholder dispute) -- that the $1 billion financing commitment from Citigroup Global Markets, plus cash from ongoing operations, would allow it to continue operating "business as usual."

More of that business as usual for Windstream is building out broadband with government subsidies through the Universal Service Fund, something some in Washington were urging the company to maintain through the bankruptcy process. "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 Rep. Doug Collins (R-Ga.). "Windstream must continue to meet its obligations under the Connect America Fund to provide broadband service to rural communities like northeast Georgia."

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The Communications Workers of America says it will take an active role in the bankruptcy proceeding and has employed a lawyer to protect members and retirees. It represents about 1,200 Windstream employees. The bankruptcy was triggered by a Feb. 15 court decision that Windstream had violated its agreement with bondholders by spinning off some telecom network assets into a real estate investment trust. That spin-off was challenged by Aurelius Capital Management (“Aurelius”) and U.S. Bank National Association.

Windstream disputes the decision and says that since its Chapter 11 filing was not due to operational failure, it "does not anticipate the need to restructure material operations," says Windstream president Tony Thomas.

"It’s concerning when one of the nation’s largest internet and voice service providers files for bankruptcy," said FCC commissioner Geoffrey Starks. "Windstream provides critical 9-1-1 service and I will be monitoring the situation closely to ensure that there are no disruptions. Windstream also provides broadband service to over 1 million customers across the U.S. and it is essential that their interests are represented and protected as the company reorganizes. I will also be watching to ensure that Windstream makes proper use of the millions of dollars in Universal Service funding it receives and that it meets all broadband connectivity and other commitments related to that funding."

Starks did give the company a shout-out for that "business as usual" goal. "I’m sure that this process is unsettling for Windstream’s customers and employees," he said, "so I am glad that Windstream took immediate steps to ensure that it can continue to operate."

"The court judgement illustrates that complex transactions and covenant interpretation can expose creditors to event risk. The rise of hedge fund activism in debt markets is adding to these risks," said Fitch Ratings of the bankruptcy proceeding. "The decision may also reflect that the transaction was seen according to its economic or financial reality instead of legal formation. Covenant Review, a Fitch-related company, described the ruling in favor of Aurelius [against Windstream] as 'a shocker' and another reminder of the unpredictability of court rulings."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.