Two Little Rock communications companies acknowledged Tuesday that they can't connect on an agreement to resolve a legal dispute.
Windstream Holdings Inc. and Uniti Group Inc. both noted that mediation efforts to settle a dispute over a fiber leasing arrangement have reached an impasse. Windstream said it will pursue litigation to resolve the disagreement.
"We were unable to reach a satisfactory agreement with Uniti," Windstream Chief Executive Officer Tony Thomas said in a statement. "Now we are fully focused on pursuing our litigation claims to conclusion."
In a regulatory filing, Uniti noted that the discussions have reached a standoff. "The mediation has not been terminated; however, the parties have not reached a resolution with respect to the issues and claims subject to the mediation," the filing said. "Therefore, the mediation has been suspended indefinitely by the mediator."
Analysts with Wells Fargo Securities issued a report saying that "the two parties are fairly far apart based on our understanding of the facts."
Each company unveiled details of the talks, with Windstream noting that it joined a creditor group in proposing a settlement that included cash payments, fiber investments from Uniti and a position in Uniti stock.
The proposal called for Uniti to pay $525 million in cash and grant 19.99% of Uniti common stock, as well as invest $1.75 billion in fiber improvements through April 2030. The group also proposed that Uniti pay $175 million to acquire certain Windstream fiber assets.
In contrast, Uniti proposed spending the $1.75 billion in capital improvements with a $100 million cash payment and no stock. The company also proposed paying $150 million to purchase certain Windstream assets.
A trial is scheduled for March 2-6 before Judge Robert Drain in U.S. Bankruptcy Court for the Southern District of New York.
News of the mediation breakdown sparked trading of Uniti's stock, which closed at $6.16, up 10 cents. Nearly 8.5 million shares were traded Tuesday; the average volume is just under 2 million shares. Windstream, which was delisted from the Nasdaq exchange when it filed for bankruptcy in February, trades over the counter. Its shares closed at 18 cents.
Moody's Investors Service said Tuesday that it has completed a periodic review of Uniti's credit rating. There was no rating change, but the firm said Uniti seems to be in a strong position related to the Windstream arrangement. "While Uniti's lease terms with Windstream may be renegotiated during Windstream's bankruptcy restructuring, we expect Uniti's bargaining position in that restructuring process will be reasonably strong given the importance of its infrastructure assets to Windstream's service operations," Moody's said.
In July, Windstream sued Uniti over a $650 million payment that Windstream makes annually to lease copper and fiber lines from Uniti. The arrangement provides network access that Windstream needs to deliver services to most of its customers across the nation.
Last week, both companies reported income losses in their third-quarter earnings announcements. Windstream reported a loss of $129 million while Uniti's loss was $19.5 million. Revenue at Windstream slipped 11% to $1.27 billion while revenue at Uniti increased 4% to $263.6 million.
Windstream is a communications and network services provider. Uniti, a real estate investment trust, owns communications infrastructure.
Business on 11/13/2019