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Telephony/UC/Collaboration


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Exit Sign

Court Ruling a ‘Significant Step’ in Windstream Chapter 11 Bankruptcy Exit

  • Written by Craig Galbraith
  • May 11, 2020
Plus, Windstream's quarterly earnings report points to a spike in sales of the hottest services in the channel.

Windstream, the business communications giant with a huge channel play, is a step closer to a chapter 11 bankruptcy exit.

A federal judge in New York on Friday approved Windstream’s proposed settlement with Uniti Group. Uniti spun off from Windstream in 2015 when the latter sold off some of its network assets. Uniti controls the broadband network that is critical to Windstream’s operations. Windstream supplies approximately 70% of Uniti’s revenue in exchange for access to the network.

The agreement calls for Uniti to invest $1.75 billion in the network, which allows Windstream to offer 1 gigabit speeds to more than half of the areas it serves its Kinetic internet customers. Uniti also will pay Windstream $490 million and buy some unused and underutilized dark fiber from Windstream for another $285 million.

The judge also approved a commitment by Windstream lenders to invest in the reorganized company. Windstream says it has approval from the majority of its creditors which hold about 80% of its $5.5 billion in debt.

Windstream filed for bankruptcy in February 2019, and the disagreement with Uniti followed shortly after. To lease the Uniti network, Windstream owes Uniti $650 million a year, a number the Arkansas-based communications provider said is far too much. Under the agreement, Windstream will continue to pay the current rate to lease fiber from Uniti. But that number could rise depending upon Uniti’s annual capital spend, the Wall Street Journal noted.

Windstream's Kristi Moody

Windstream’s Kristi Moody

“The court ruling is a significant step forward in our Chapter 11 process and keeps us on a path to emerge from restructuring as early as the end of summer, pending regulatory approvals,” Kristi Moody, Windstream general counsel, told Channel Partners. “The Uniti agreement provides significant and essential network investments for Windstream over the next 10 years, positioning the company for long-term growth.”

The approved agreement opens the door for Windstream to restructure and emerge from chapter 11 bankruptcy sooner than later. CEO Tony Thomas said on Monday’s earnings call that should happen in late August. Expect the company’s top lenders to take control of the lion’s share of Windstream’s equity.

Quarterly Earnings

Meantime, the company on Monday offered mixed news for investors through its first-quarter earnings report. Sales of certain business services were a bright spot.

Windstream grew what it calls “enterprise strategic revenue” by 28% year over year. It should come as no surprise that hot technologies SD-WAN and UCaaS were a big part of that. Windstream expects those services, combined with its OfficeSuite UC product, to account for $322 million in sales this year.

CEO Tony Thomas says the numbers are especially good when considering what COVID-19 is doing to the economy.

“Windstream overcame unprecedented conditions resulting from the coronavirus pandemic to deliver solid results in the first quarter,” said Thomas.

And Thomas claims Windstream’s network remains strong.

“Our network continues to perform well, primarily due to our past network investments and modernization efforts, even as usage has increased significantly in recent weeks,” he said.

Total revenue and sales, however, were down from $1.32 billion a year ago to $1.2 billion in the first quarter. And enterprise service revenue overall was down 18%, from $690 million in the year-ago quarter to $590 million last quarter.

Windstream added a record 18,000 new subscribers to its Kinetic broadband service, but Kinetic service revenue fell slightly from the same quarter last year.

The company named Matt Milliron its new channel chief earlier this year. He told us in a Q&A how partners look forward to putting the bankruptcy saga behind them.

“This settlement allows us to finalize our go-forward business model as well as file [our] reorganization [plan],” Milliron said in March. “{We will] emerge from restructuring directionally during the middle part of this year.”

Tags: Agents Regulation & Compliance SDN/SD-WAN Telephony/UC/Collaboration

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One comment

  1. Avatar Larry May 24, 2020 @ 9:32 pm
    Reply

    I do not agree with Windstream being able to file chapter 11 for infrastructure improvements when they didn’t complete anything in Stephens county at all. I would deny it completely, they are dishonest and stole money.

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