The latest development in the Windstream/Aurelius/Uniti saga is an interesting attempt to resolve things. Uniti and Windstream are apparently talking about a swap deal aimed at, you know, making everyone happy.
If such talks were successful, Windstream would get a renegotiated lease, lowering its annual payments to Uniti to use the infrastructure it spun off with them back in 2015. Uniti would get some additional ‘surplus assets’ as well as perhaps an extension of the lease and/or an upfront payment. That could mean more fiber, this time possibly not exclusively leased to Windstream but available to lease to third parties etc.
Uniti is said to be able to slice $100-150M off of the current $650M annual bill without violating its own leverage ratio requirements. Could that be the price tag of peace? It seems like there will have to be one, as the alternatives look messy all around.
The possibility of Windstream actually rejecting the lease as part of the Chapter 11 process would be a case of mutually assured destruction. Uniti would lose 70% of its revenue, its REIT tax status, and bust through a pile of debt covenants in a single blow – surely forcing them under. But Windstream would no longer own or lease any connectivity to much of its customer base. And undoing the entire REIT spin-off entirely doesn’t seem to be within the scope of anyone’s authority just yet.
However, it remains to be seen whether Windstream’s creditors are interested in this solution, have another viable path in mind, or wish to simply step closer to the brink to ratchet up the pressure further before trying to settle anything. My money is currently on the third option, but what do I know.
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This is a terrible deal for Windstream creditors. Yes, they lop off some of the grossly inflated lease expense, but they’re still indefinitely tethered to Uniti, turning Windstream into a zombie company that can never be sold.
They need to stop dicking around and put humpty dumpty back together again and fire both management teams. Management from both companies are ground zero first for this insanely stupid REIT structure and second for this entire post-split fiasco. It’s shocking, at a minimum, that the Windstream creditors haven’t sacked the whole Windstream leadership team.