There is growing speculation that a Windstream bankruptcy and massive downsizing are imminent in the wake of a devastating court ruling, which was handed down by the U.S. District Court of the Southern District of New York on February 15.
The Story So Far
The court ruled that in 2015 when Windstream spun out its internally-managed real estate trust Uniti Group, it improperly transferred over $300 million worth of assets that served as security for bonds issued by Aurelius Capital Management LP. Uniti Group is Windstream’s largest customer, with assets that include over 4 million fiber strand miles and around 850 wireless towers.
In an interview with Bloomberg, Morningstar Analyst Matthew Dolgin said: “If the verdict is upheld throughout all potential appeals, we think there is a reasonable probability that Windstream would be forced into bankruptcy.”
Anders Bylund of the Motley Fool was blunter in his assessment: “Windstream has been circling the drain for years, but the situation is reaching a critical point in a quicker and more dramatic fashion than expected. The court decision will be appealed to a higher court, but Windstream’s rearview mirror already looks back at many years of dwindling revenue and shrinking cash flows. Whatever happens to Aurelius and its claims, I don’t see a future for this company.”
At the end of trading on February 19, shares of Windstream stock plunged 62 percent below the close on February 15 (before the court ruling was made public), while shares of Uniti stock dropped 39 percent.
Windstream Bankruptcy: How it Impacts Employees and Customers
While much attention is being paid to how a Windstream bankruptcy would impact investors, there are two additional groups that will also bear the brunt of a Chapter 11 filing: employees and customers.
With respect to employees, Windstream workers are already sounding the alarm bells about impending layoffs. Reads an anonymous post from an anxious Windstream worker at thelayoff.com:
We are headed for bankruptcy
Windstream can last for a couple more years, when some debt comes due, unless Aurelius forces them into Chapter 11 bankruptcy sooner. The FCC and various state public service commissions will weigh in during bankruptcy since they need to maintain 911/landline services to Win’s ILEC subscribers. The challenge for a bankruptcy judge will be finding another telecom operator who wants to take over these customers without owning the underlying assets, most of which are now owned by Uniti. Let’s hope another operator is better than the current inept executive team, who understands little about telecom.
And with respect to customers, it is a foregone conclusion that any restructuring will, at least for several months or even years, disrupt normal operations. And while acquisition by another company may pacify investors, there is no assurance that a new player will have the capacity or desire to provide Windstream customers with the service and performance standards they expect. It is more likely that the focus will be on generating revenues by providing new customers with big incentives vs. providing existing and loyal customers with better service.
DigitalPhone.io: Welcoming Ex-Windstream Customers
At DigitalPhone.io, we have been welcoming ex-Windstream customers for several years — especially small and mid-sized business customers who are not getting the responsiveness, support, services, features, and the affordability they were promised.
Regardless of whether a Windstream bankruptcy or massive downsizing happens in the coming months or years from now, if you are a Windstream customer then we invite you to learn more about our state-of-the-art cloud telephone solution. In addition to saving thousands of dollars a year vs. a traditional telephone system, your business will get a wide range of advanced calling features such as an auto attendant, voicemail-to-email, live call transfer, chat/SMS, find-me-follow-me, and more.
We have been a leader in the cloud telephone marketplace for 20 years. We do not over-promise and under-deliver or make financial decisions that boost our bottom line at the expense of our customers. We put our customers FIRST, which is why they trust and recommend us.