Bankrupt telecom service provider Windstream Holdings on Tuesday told a New York bankruptcy judge it is very close to nailing down all the details in its settlement of a dispute with spinoff real estate investment trust Uniti Group Inc. over a $650 million-per-year lease agreement.
At a Tuesday court hearing, counsel for Windstream said they had filed the "definitive" versions of the settlement and an associated asset purchase agreement and expected to have the final versions of their new lease agreements filed by the end of the day.
"We have been working day and night," Windstream counsel Brad Weiland said.
In 2015, Windstream spun off a large part of its copper wire and fiber optic network assets into Uniti, a tax-immune real estate investment trust.
Windstream entered Chapter 11 in February 2019 and filed an adversary suit in July seeking to recharacterize its lease agreement with Uniti as an unfair disguised financing arrangement that required the debtor to pay $650 million each year while the value of the network assets depreciated at an unacceptably rapid rate and it was left on the hook for improvements and upgrades to the assets.
In March, a day before the trial in the case was scheduled to begin, Windstream and Uniti announced they had reached an "agreement in principle" on a settlement. The terms included a pledge by Uniti to spend $1.75 billion upgrading the network and Windstream to accept an 8% increase in lease payments, along with the sale of $244.5 million in Uniti stock to Windstream creditors and Uniti's purchase of $40 million in Windstream-owned fiber optic assets.
However, on April 6 Windstream asked to adjourn a May 7 settlement hearing and reschedule the start of the trial, saying it has been unable to complete "definitive documentation" on the settlement.
The unsecured creditors committee cited that filing in their objection to Windstream's request for a four-month extension to the period they would have the exclusive right to file a Chapter 11 plan, saying it cast doubt on Windstream's ability to proceed with a plan. Both the committee and a senior notes indenture trustee had called for a two-month extension.
At Tuesday's hearing, counsel for Windstream said it and Uniti had agreed on final versions of both the settlement and the asset purchase agreement and were close to agreement on the new leases.
"Just this morning, the companies' two CEOs spoke on the remaining issues and have committed to working them out today," Weiland said.
Weiland also said Windstream had agreed to cut its exclusivity period extension request to two months, which U.S. Bankruptcy Judge Robert Drain agreed to, saying that should be sufficient time for Windstream to negotiate a "more consensual" plan.
Windstream is represented by Stephen E. Hessler, Marc Kieselstein, James H.M. Sprayregen, Ross M. Kwasteniet and Brad Weiland of Kirkland & Ellis LLP.
Uniti is represented by Eli J. Vonnegut and Elliot Moskowitz of Davis Polk & Wardwell LLP.
The committee is represented by Lorenzo Marinuzzi, Todd M. Goren, Jennifer L. Marines and Erica J. Richards of Morrison & Foerster LLP.
The indenture trustee is represented by Thomas Lauria, Christopher Shore, Harrison Denman, Philip Abelson and Julia Winters of White & Case LLP.
The adversary case is Windstream Holdings Inc. et al. v. Uniti Group Inc. et al., case number 19-08279, in the U.S. Bankruptcy Court for the Southern District of New York.
The bankruptcy 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.