Windstream Files For Bankruptcy

Windstream has filed for Chapter 11 bankruptcy following a $310 million dollar judgement against Windstream brought by the hedge fund Aurelius Capital Management.

The Wall Street Journal reports, "The rural broadband provider’s chapter 11 filing Monday is the culmination of a bruising 18 month legal fight between the telecom company and Aurelius, which had argued a two-year-old spinoff of the company's fiber-optic cable network violated the covenants on one of its bonds," regarding sale-leaseback restrictions.

Created in 2006 following the merger of Alltel and Valor Telcom, Windstream grew into a $6B revenue company.

On February 15th, the company had defaulted on some of its bonds causing a 60% decline in its stock. Then on February 25th, it filed for Chapter 11 bankruptcy. The company recently obtained debtor-in-possession financing from Citigroup to continue operations. Ars Technica reports, “Today, Windstream said it has obtained a commitment for $1 billion in financing from Citigroup Global Markets. ‘With approval from the Court, we will continue paying our employees, maintaining our relationships with our vendors and business partners and serving our customers as usual,’”

While the company says this action should not impact operations, it is hard to see how this will not cause issues within such a capital intensive business. Although Windstream claims its core business is healthy, it is hard to see how a company could be considered healthy if a $310M judgement could force a company with over $6B in revenue into bankruptcy.