Windstream Holdings Inc., a rural telecommunications company which serves Gallatin and many other area towns, filed for bankruptcy protection on Feb. 25. The bankruptcy announcement came days after the rural telecom service provider lost a legal battle against Aurelius Capital Management over a spinoff of its network assets into a real estate investment trust.
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Aurelius, a Windstream bond holder, accused the company of violating its bond covenant when it spun off its copper wire and fiber cable business into a new company in 2015.
A U.S. district court on Feb. 15 agreed, and ruled in Aurelius’ favor. Judge Jesse Furman of the Federal District Court in Manhattan ruled that Windstream had violated bond covenants when it spun off its fiber-optic cable business into a new company called Uniti Group.
Windstream was hit with a $310 million judgment in a legal loss to the capital management firm.
The bankruptcy filing will allow the company to continue to operate while reorganizing its finances.
“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 (the) decision,” Chief Executive Officer Tony Thomas said.
The company listed assets in the range of $10 billion to $50 billion and liabilities in the range of $10 billion to $50 billion.
With the approval of the bankruptcy court, Windstream plans to continue pay employees and maintaining services and vendor relationships. Citigroup (C) has committed $1 billion in debtor-in-possession financing to help the company continue operating.