This morning Uniti Group responded in defense of its lease payments from Windstream after filings from UMB Bank NA and U.S. Bank NA. According to the Wall Street Journal on Friday, these creditors are seeking to have Windstream withold its $54M in monthly rent to Uniti for its fiber network.
The underlying deal in which Windstream spun off Uniti four years ago and rented back its fiber came back to haunt Windstream in a big way this spring when it lost a big lawsuit to Aurelius Capital Management and was driven into chapter 11 bankruptcy protection. Now creditors are looking to undo or redo the deal in an effort to extract more value from the deal. By pushing to withold lease payments, they likely hope to pressure Uniti into greater modifications of the lease terms than they might otherwise be able to get.
According to Uniti CEO Kenny Gunderman, Uniti continues “to believe that the lease is a true lease”, but also states that the company is “open to working with Windstream and its constituents on mutually beneficial modifications to the lease”. By mutually beneficial here, I suppose one means the banks get more money back and Uniti gets to stay in business. I earlier wondered about the actual mechanism by which Uniti might get dragged into all this despite four years of water under the bridge, but I guess now I know.
It seems crazy that lease payments could be withheld for the infrastructure Windstream’s business depends on, since that would risk undermining more value than it creates. If they aren’t paying for the infrastructure, how can they continue to provide phone and data services across it? Yet the actual ownership is pretty passive, as it’s not Uniti that has crews out there maintaining these particular physical assets for the most part. Even so, if the lease is undone, what about the ownership stake Windstream gained (and later sold) and the debt it unloaded to acquire that lease in the spinoff. It only gets messier.
Clearly the likeliest end result is a renegotiated lease, but it won’t be a pleasant summer for anyone but the lawyers until that happens.
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Categories: Fiber Networks · Financials
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UNITI doesn’t HAVE to re-negotiate the lease. In the BK case, WIND had a period to Go/No Go on the lease. It chose to Go (obviously). The lease is up in 2030.
Refer: https://seekingalpha.com/news/3464200-uniti-falls-windstream-mentions-high-lease-costs
SEC filing of the lease here: https://www.sec.gov/Archives/edgar/data/0001620280/000119312515147341/d910956dex101.htm
Yeah, practically nobody believes that, and even Uniti has acknowledged it will need to talk to Windstream.
you are correct!! Peter seems to be reading out of a textbook on Chapter 11 while anyone who’s ever been through one knows there’s no textbook for Chapter 11.
Anyone who thought Windstream creditors were going to sit idly by watching Uniti sit there with that Cheshire Cat grin waiting to collect its money has never met a bondholder who recognizes they’re holding a giant turd which is what Windstream is w/o renegotiating or invalidating the Uniti lease.
This BK is far from over. The one certainty is that there’s no textbook that’s going to tell you how it will play out.
Doing business with Windstream is a lot like doing biz with Huawei… sure, it might be okay and maybe there is nothing to worry about. But since there are 20 other options for the same thing and the same price can almost always be extracted, why would you put your companies critical infra at risk of the maybe?
Entirely foreseeable / predictable. Such a stupid structure to begin with. They will be forced to renegotiate it, regardless of any wish on Uniti’s part they are going to take a hit.
Wow, UNIT has been dragged into this clusterf^#k of a mess? Who would’ve thunk it. Oh, yeah, me!
Seriously, the frustrating part about all of this is that executives at both companies haven’t changed and they were both part of the brain trust that conceived this abortion in the first place.
Meanwhile, it’s the employees slugging it out each day in the trenches that end up getting screwed in all this while the sr leaders appeal to their respective boards for special bonuses for all the hard work they’re doing to keep the companies together.
It’s sort of like starting a giant fire, then having to work overtime to put out the fire you started, then asking for hazard pay.
Both Gundermans should be out on their asses. Instead, they’re collecting bonuses and preparing nice exit packages for themselves when one of the creditors finally says “no mas, they got to go.”
This silly little worthless company is a microcosm of virtually everything that’s wrong with modern capitalism.
As I said in August 2014, “This event does not enhance by one iota Windstream’s operations, marketing, branding, customer experience, vendor relationships, etc.”
https://www.telecomramblings.com/2014/07/windstream-spin-network-reit/#comment-19769
This transaction was nothing more than pure financial alchemy that mesmerized gullible investors with a shiny new object called a telecom REIT. Once those golden tongued i-bankers told them they had found a way to spin straw into gold, they were all sold. Never mind that the transaction was illogical. Never mind that the deal essentially eliminated any chance (and any takeover premium) that Windstream could ever be bought out by another company b/c it was tethered to Uniti until 2030.
Guess what, these i-bankers will be back with a new shiny item that will surely hypnotize the next set of investors seeking an extra 100-200 basis points.
I hope the creditors, employees and the rest are not too stupid to realize it is the Little Rock clan versus everyone else. There ain’t no Windstream agin Uniti. If the outsiders do not get that, they’re ‘fixen’ to get fvck’d.
I have no clue what your post means.
“Uh, listen here mister. We got no way understandin’ this world. We got about as much sense of it as bird flyin’ in the sky. There’s a lot that bird don’t know, though it don’t change the fact the world is happenin’ to him all the same. What I’m tryin’ to say is, is that the course of your life it is changing, you don’t even see it…”
You would be the thief in this terrific Tom Hardy scene from Lawless