Windstream shares fell more than 60 percent Tuesday, the first trading day since the Little Rock-based rural telephone company lost a federal lawsuit in New York.
The shares fell $2.06 to end the day at $1.31 in trading on the Nasdaq exchange. Windstream's market value fell 61.1 percent to about $56 million. The shares traded for as low as 94 cents during the day Tuesday.
On Friday, U.S. District Judge Jesse Furman ruled that Windstream defaulted on some of its bonds in 2015 when it spun off Uniti Group Inc.
Actions by Windstream subsidiary Windstream Services amounted to a breach of its financial covenants, making Aurelius Capital Management, a New York hedge fund, entitled to a $310 million judgment, Furman said.
On Tuesday, before the market opened, Frank Louthan, an analyst with Raymond James & Associates, lowered his rating on Windstream from a buy to a hold.
"The loss of the court case is likely to leave significant uncertainty as to the near- and medium-term trading of the stock," Louthan said.
With the stock trading down 61 percent Tuesday, Louthan said, "From that level, the possibilities extend from bankruptcy, which we believe would be a negative outcome for all stakeholders."
The $310 million awarded to Aurelius includes principal outstanding and interest totaling about $11.4 million.
On Monday, Windstream announced that it would postpone its fourth-quarter and full-year 2018 earnings until as late as March 18. The firm had been scheduled to release its earnings report on Thursday.
Windstream and Aurelius have until Monday to come to a resolution, Louthan said.
In a statement Tuesday, Aurelius said it takes no pleasure in Windstream's resulting financial predicament.
"Windstream could easily have averted [the ruling] -- first by not playing fast and loose with its noteholders in 2015, hoping nobody would hold the company to account, and second by settling," Aurelius said. "Instead, Windstream wasted an exorbitant amount -- more than would have been needed to settle with us at the time -- on an ineffective exchange offer and then on litigation."
Aurelius said that, in its view, a management and a board with an extreme and unwarranted assessment of Windstream's legal case in essence chose to bet the company.
"The company lost," Aurelius said.
Business on 02/20/2019