Windstream Gets Judge's OK to Tap $400 Million in DIP Funds
A New York bankruptcy judge on Tuesday gave telecommunications company Windstream Holdings permission to tap into $400 million of their debtor-in-possession financing, cash the company says it desperately needs after a court-ordered note default.
U.S. Bankruptcy Court Judge Robert Drain gave Windstream interim approval to tap into part of its $1 billion bankruptcy financing after the company told him that a district court ruling earlier this month had thrown it into an unexpected liquidity crisis. Windstream, an Arkansas-based broadband provider, filed for Chapter 11 on Monday, blaming an earlier federal court ruling finding it had defaulted on some of its senior notes.
"We’re here because we need a DIP and we need it fast,” Windstream counsel Stephen Hessler said at Tuesday's hearing.
On Feb. 15, U.S. District Judge Jesse Furman ruled in favor of Windstream noteholder Aurelius Capital Management, finding a 2015 real estate spinoff by Windstream had triggered the default of notes held by Aurelius and that Windstream owed the hedge fund nearly $310.5 million.
The company told the court that the ruling had the effect of cutting it off from its $450 million credit facility and leaving it with only $6 million cash on hand, forcing it to rush into bankruptcy to secure funding until it can resolve the situation with a restructuring. According to the company’s Chapter 11 declaration, it currently has about $5.6 billion in funded debt.
Hessler told the court the he does not expect the bankruptcy process to last long, saying the company, with about 12,000 employees and 1.4 million customers, has been and is financially successful.
“This company does not belong in Chapter 11 for an extended length of time,” he said.
He said the full DIP from Citigroup Global Markets Inc. will consist of a $500 million credit facility and a $500 million term loan, with the interim order allowing it to tap into $100 million of the facility and $300 million of the loan.
Hessler said the exact terms of the DIP were still being worked out, and counsel for Windstream, Citigroup and a number of creditors left for an courtroom across the hall to do just that while Judge Drain heard and ruled on the rest of the first-day motions.
Windstream is represented by Stephen E. Hessler, Ross M. Kwasteniet, Marc Kieselstein, Brad Weiland, Cristine Pirro Schwarzman and John R. Luze of Kirkland & Ellis LLP.
The case is In re: Windstream Holdings Inc. et. al, case number 19-22312, in the U.S. Bankruptcy Court for the Southern District of New York.