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Windstream Modifies REIT Plans

Windstream Holdings announced some changes to its planned real estate investment truct, telling shareholders Thursday that it plans to retain a 19.9% interest in the new entity, and distribute the remaining 80.1% to shareholders.

The company had previously planned to distribute the entire REIT to shareholders when it first announced plans in July. Windstream plans to place fiber and copper plant and fixed real estate assets in the REIT, which should give its substantial tax savings.

In a statement, Windstream said the retained shares would be sold opportunistically during the 12-months after the spin-off to help retire debt.

“Given the importance of the REIT formation to Windstream’s future performance, the Board of Directors and I are intently focused on completing the spinoff, and it remains a strategic priority,” Windstream CEO Tony Thomas said in a statement. “This refined structure allows Windstream to reach our leverage goals faster to strengthen our competitive position, which we believe is appropriate and prudent given the fast changing telecom industry and rapidly evolving customer needs. By improving Windstream’s credit profile, the REIT benefits from having a financially stronger anchor tenant and retains the financial flexibility to grow and return capital to its shareholders.”

Windstream will hold a special meeting of stockholders on Feb. 20, in conjunction with the REIT spinoff to approve a 1-for-6 reverse stock split and an amendment to the certificate of incorporation of Windstream Corp., a subsidiary of Windstream Holdings that will facilitate the conversion of Windstream Corp. into a limited liability company. Without the LLC conversion, Windstream said it would be on the hook for a tax liability of $600 million to $800 million, based on current estimates, at Windstream Holdings that would be triggered upon execution of the spinoff.

In a blog posting Elevation LLC media analyst Steve Sweeney said while retaining the stock is positive in that it will help Windstream pay down about $4 billion in debt, it will also create a slight overhang on the REIT stock, “since there will be shares to be sold down by the parent in the first year.”