Windstream Plummets After Filing For Chapter 11 Bankruptcy

Shares of advanced network communications and technology solutions provider Windstream Holdings Inc WIN were down 25 percent Monday after Bloomberg reported the company is preparing itself to file for bankruptcy.

What Happened

Windstream was on the losing end of a Feb. 15 court decision that sided with hedge fund Aurelius Capital Management, sources close to the matter told Bloomberg. The court evaluated the 2015 spin-off of Windstream's Uniti business, which Bloomberg said may have violated its financial covenants and cheated bondholds as it removed value from the assets which backed the securities.

The Feb. 15 decision handed Aurelius a $310 million judgment and other credits are likely to demand repayment on debts held, Bloomberg noted. The company confirmed the news with a press release Monday afternoon.

Why It's Important

Windstream will likely no longer be able to access its revolving credit line if it's in default of debt. Citi analysts were quoted as saying it would not be surprising if the company finalizes a bankruptcy proceedings.

Here's what Tony Thomas, president and CEO of Windstream said in the press release.

"Following a comprehensive review of our options, including an appeal, the Board of Directors and management team determined that filing for voluntary Chapter 11 protection is a necessary step to address the financial impact of Judge Furman's decision and the impact it would have on consumers and businesses across the states in which we operate. Taking this proactive step will ensure that Windstream has access to the capital and resources we need to continue building on Windstream's strong operational momentum while we engage in constructive discussions with our creditors regarding the terms of a consensual plan of reorganization. We acted decisively to secure the long-term financial stability of Windstream, and we are confident that, upon completion of the reorganization process, we will be even better positioned to invest in our business, expand our speed and capabilities for our customers and compete for the long term.

Windstream's stock was halted for trading at 11:41 a.m. ET. After reopening for trade at 2:05 p.m., the stock dropped to 48 cents per share, down 43.4 percent.

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