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Windstream Holdings – Files Technically Modified Plan and Voting Results in Advance of June 24th Confirmation Hearing, Will Ask Court to Cram Down Unsecured Noteholders

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June 22, 2020 – The Debtors filed a First Amended Joint Chapter 11 Plan of Reorganization with technical modification [Docket No. 2201] which included a redline showing changes from the version of the Plan filed on May 14, 2020 [1812]. The technical modification did not include any changes to the Debtors' classes, claims, voting rights, and expected recoveries, which are otherwise summarized below.

On June 21st, the Debtors filed their Plan voting results (see below) which flagged some concerted opposition, notably in Class 6A (“Obligor General Unsecured Claims”) where the Debtors failed to garner a two-third's level of supportFN. This is no small class, with over $421.0mn of claims voting against; a fact that the Debtors will ask the Court to brush aside at the June 24th hearing arguing that the noteholding naysayers, who "have made no substantive contribution to the success of these Chapter 11 Cases" and have "asked for a larger slice of the pie they did not help bake" should be crammed down.

FN: Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by a class of impaired claims as acceptance by holders of at least two-thirds in dollar amount and more than one-half in a number of allowed claims in that class, counting only those claims that have actually voted to accept or to reject the plan.

The Debtors’ brief in support of Plan confirmation [Docket No. 2180] provides:

“After nearly sixteen months in chapter 11, the Debtors have brought these cases to the brink of confirmation. The Debtors’ proposed chapter 11 plan (the ‘Plan’) offers the best and only path to emergence from bankruptcy, would allow the Debtors the opportunity to achieve their go-forward business plan, and maximizes recoveries for the Debtors’ creditors. The Plan is the product of many months of negotiations across creditor classes, including more than seven months of mediation overseen by the Honorable Shelley C. Chapman. Irrespective of views at the outset of these Chapter 11 Cases, it is undisputed today that the Debtors’ first lien creditors are the fulcrum creditor class. And the Debtors’ first lien creditors are the only creditor class willing or able to facilitate the confirmation of a plan and emergence from chapter 11. The Debtors’ first lien creditors have, among other things, agreed to fund a $750 million equity investment to fund the Debtors’ emergence and equitize a substantial portion of their more than $3 billion in secured claims. 

And, contrary to the assertions of the Unsecured Notes Indenture Trustees, the Plan is not only supported by or for the benefit of the Debtors’ first lien creditors. The second lien creditor class also voted to accept the plan, as did the Midwest Notes Claims. And more than 50 percent (although not two-thirds) of Unsecured Notes voted to accept the Plan. Further, parties to more than 11,500 assumed executory contracts will benefit from consummation of the Plan, more than 11,000 employees will keep their jobs, thousands of vendors will continue to transact with the Reorganized Debtors, and more than 1.4 million residential and small business customers (many in rural areas without other options) will continue to have telephone, and internet services. 

Moreover, the Plan offers favorable treatment to most unsecured creditors other than Unsecured Noteholders—in fact, the plan offers significant benefits even to nearly all members of the creditors’ committee, including the PBGC (assumption of the Debtors’ pension plan), the CWA labor union (assumption of applicable collective bargaining agreements), and the trade vendors on the Committee (assumption of applicable executory contracts). 

It seems that only the Unsecured Notes Indenture Trustees (individually and through participation on the Committee), evidently without a mandate from a majority of holders of Unsecured Notes (which voted in favor of the Plan), oppose confirmation. Unlike the Debtors’ first lien creditors or other supporting stakeholders, the Unsecured Notes Indenture Trustees have made no substantive contribution to the success of these Chapter 11 Cases and have made no commitment to facilitate the Debtors’ emergence. They have simply asked for a larger slice of the pie they did not help bake. Ultimately, the Unsecured Notes Indenture Trustees’ objections to confirmation must fail. 

Plan Overview

The Disclosure Statement [Docket No. 1813] notes, “The Plan contemplates, among other things, the repayment of a portion of the First Lien Claims from proceeds of the New Exit Facility and Rights Offering, as well as other cash on hand in excess of the Minimum Cash Balance, the equitization of a portion of the First Lien Claims, the distribution of subscription rights to participate in the Rights Offering and, if applicable, the distribution of replacement term loans under the New Exit Facility to the remaining portion of First Lien Claims, the distribution of replacement term loans under the New Exit Facility to holders of Midwest Notes Claims, cash distributions to holders of Second Lien Claims and Obligor General Unsecured Claims if the classes of such creditors accept the Plan, reinstatement or repayment of Non-Obligor General Unsecured Claims, and the cancellation of existing Interests in Windstream.”

The following is a summary of classes, claims, voting rights, and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept, and not entitled to vote on the Plan. The aggregate amount of claims is $0.0 and the estimated recovery is 100%.
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept, and not entitled to vote on the Plan. The aggregate amount of claims is $0.0 and the estimated recovery is 100%. 
  • Class 3 (“First Lien Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $3,151.0mn and the estimated recovery is 62.8 – 71.3 %. Each holder of an Allowed First Lien Claim shall receive its Pro Rata share of: (a) 100% of the Reorganized Windstream Equity Interests, subject to dilution on account of the Rights Offering, the Backstop Premium, and the Management Incentive Plan; (b) cash in an amount equal to the sum of (i) the Distributable Exit Facility Proceeds, (ii) the Distributable Flex Proceeds, (iii) the cash proceeds of the Rights Offering, and (iv) all other cash held by the Debtors as of the Effective Date in excess of the Minimum Cash Balance; (c) the Distributable Subscription Rights; and (d) as applicable, the First Lien Replacement Term Loans.
  • Class 4 (“Midwest Notes Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $100.0mn and the estimated recovery is 100%.  Each holder of an Allowed Midwest Notes Claim shall receive its Pro Rata share of the Midwest Notes New Exit Term Facility, the principal amount of which shall be $100.0mn, plus any interest and fees due and owing under the Midwest Notes Indenture and/or the Final DIP Order to the extent unpaid as of the Effective Date.
  • Class 5 (“Second Lien Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $1,235.0mn and the estimated recovery is 0 – 0.125%. If holders of Allowed Second Lien Claims vote as a class to accept the Plan, on the Effective Date, each holder of an Allowed Second Lien Claim shall receive cash in an amount equal to $0.00125 for each $1.00 of Allowed Second Lien Claims. If holders of Allowed Second Lien Claims vote as a class to reject the Plan, on the Effective Date, each holder of an Allowed Second Lien Claim shall receive treatment consistent with section 1129(a)(7) of the Bankruptcy Code.
  • Class 6A (“Obligor General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $1,183.0 – $1,203.0mn and the estimated recovery is 0 – 0.125%.  If holders of Allowed Obligor General Unsecured Claims vote as a class to accept the Plan, on the Effective Date, each holder of an Allowed Obligor General Unsecured Claim shall receive cash in an amount equal to $0.00125 for each $1.00 of such Allowed Obligor General Unsecured Claims. If holders of Allowed Obligor General Unsecured Claims vote as a class to reject the Plan, on the Effective Date, each holder of such an Allowed Obligor General Unsecured Claim shall receive treatment consistent with section 1129(a)(7) of the Bankruptcy Code.
  • Class 6B (“Non-Obligor General Unsecured Claims”) is unimpaired, deemed to accept, and not entitled to vote on the Plan. The aggregate amount of claims is $34.0 – $39.0mn and the estimated recovery is 100%.
  • Class 7 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject, and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 8 (“Intercompany Interests”) is unimpaired/impaired, deemed to accept/reject, and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 9 (“Interests in Windstream”) is impaired, deemed to reject, and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is N/A.

Voting Results

On June 21, 2020, the Debtors’ claims agent notified the Court of Plan voting results [Docket No. 2171], which were as follows:

  • Class 3 (“First Lien Claims”) 330 claims holders, representing $2,557,643,685.96 (or 98.92%) in amount and 89.92% in number, accepted the Plan. 37 claims holders, representing $27,963,379.28 (or 1.08%) in amount and 10.08% in number, rejected the Plan.
  • Class 4 (“Midwest Notes Claims”) 68 claims holders, representing $78,717,000.00 (or 99.85%) in amount and 87.18% in number, accepted the Plan. 10 claims holders, representing $115,000.00 (or 0.15%) in amount and 12.82% in number, rejected the Plan.
  • Class 5 (“Second Lien Notes Claims”) 100 claims holders, representing $649,579,000.00 (or 74.12%) in amount and 74.07% in number, accepted the Plan. 35 claims holders, representing $226,786,000.00 (or 25.88%) in amount and 25.93% in number, rejected the Plan.
  • Class 6A (“Obligor General Unsecured Claims”) 626 claims holders, representing $525,505,701.64 (or 55.51%) in amount and 66.17% in number, accepted the Plan. 320 claims holders, representing $421,207,224.61 (or 44.49%) in amount and 33.83% in number, rejected the Plan.

Exit Financing

Prior to the Effective Date, the Debtors will secure commitments to fund a new money senior secured credit facility in an aggregate amount up to $3.25bn, which will include the following facilities:

  1. the New Exit Facility Revolver, which will be undrawn on the Effective Date and may include (a) a letter of credit sub-facility up to an aggregate principal amount of $350mn to support obligations related to funding received from state and federal broadband subsidy programs and (b) an additional letter of credit sub-facility up to an aggregate principal amount of $50mn; and
  2. the New Exit Facility Term Loan, which will be funded or distributed, as applicable, on the Effective Date and (a) will include the Required Exit Facility Term Loans, which shall include the Midwest Notes Exit Facility Term Loans, and (b) may include the Flex Exit Facility Term Loans at the election of the Requisite Backstop Parties, in consultation with the Debtors and otherwise on the terms set forth in the Plan Support Agreement. The Midwest Notes Exit Facility Term Loans will rank pari passu with, and be secured on the same terms as, the other Required Exit Facility Term Loans, and have the same terms as, and be fungible in all respects with, the other Required Exit Facility Term Loans. The interest rate, maturity date, and other terms of the New Exit Facility will be consistent with the Plan Support Agreement and otherwise reasonably acceptable to the Debtors, the Required Consenting Creditors, and the Requisite Backstop Parties.

The Required Exit Facility Term Loans (other than the Midwest Notes Exit Facility Term Loans) may be reduced to an amount less than $2.05bn at the election of Requisite Backstop Parties. To the extent the amount of the Required Exit Facility Term Loans funded on the Effective Date is lower than the Required Exit Facility Term Loans Target, the Debtors will distribute the First Lien Replacement Term Loans in an amount equal to the difference between the Required Exit Facility Term Loans Target and the amount of Required Exit Facility Term Loans actually funded on the Plan Effective Date to holders of First Lien Claims in lieu of the applicable cash distributions; provided that the aggregate amount of the First Lien Replacement Term Loans will not exceed an amount to be agreed by the Requisite Backstop Parties and set forth in the Plan Supplement. The First Lien Replacement Term Loans, as applicable, will rank pari passu with and secured on substantially the same terms as the New Exit Facility Term Loan and have the same terms as the New Exit Facility Term Loan or such other terms as agreed by the Requisite Backstop Parties and the Debtors.

On the Effective Date, the net cash proceeds of the remaining Required Exit Facility Term Loans (and other cash on hand, held by the Debtors as of the Effective Date) will be:

  1. first, used to pay in full in cash Allowed DIP Claims, Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Other Secured Claims, Allowed Other Priority Claims, and executory contract and unexpired lease Cure Claims as and to the extent that such Claims are required to be paid in cash under this Plan;
  2. second, used to fund the Non-Obligor General Unsecured Claims Reserve;
  3. third, used to fund the Obligor Claims Reserve;
  4. fourth, used, to the extent necessary, to fund the Minimum Cash Balance; and
  5. fifth, distributed to holders of Allowed First Lien Claims in accordance with Error! Reference source not found. of the Plan, which amounts shall constitute the Distributable Exit Facility Proceeds.

Key Dates:

  • Plan Objection Deadline: June 17, 2020
  • Voting Deadline: June 17, 2020
  • Confirmation Hearing Date: June 24, 2020

About the Debtors

The Debtors are a leading provider of advanced network communications, technology, broadband, entertainment, security, and core transport solutions to both consumer and business customers across the United States, with a national footprint spanning approximately 150,000 fiber miles. The Debtors also offer broadband, entertainment and security solutions to consumers and small businesses, primarily in rural areas, in 18 states. As of the Petition Date, the Debtors had approximately 11,600 employees. As of the Petition Date, the Debtors had approximately $5.6 billion in aggregate funded-debt obligations under a revolving credit facility, two tranches under Windstream’s term loan facility, one series of secured first lien notes, two series of secured second lien notes, six series of unsecured notes, and one issuance of secured subsidiary notes. All debt, other than the secured subsidiary notes, has been incurred by Debtor Windstream Services and its guarantor subsidiaries.

Liquidation Analysis (see Exhibit B to Disclosure Statement for notes)

About the Debtors

The Debtors are a leading provider of advanced network communications, technology, broadband, entertainment, security, and core transport solutions to both consumer and business customers across the United States, with a national footprint spanning approximately 150,000 fiber miles. The Debtors also offer broadband, entertainment and security solutions to consumers and small businesses, primarily in rural areas, in 18 states. As of the Petition Date, the Debtors had approximately 11,600 employees. As of the Petition Date, the Debtors had approximately $5.6 billion in aggregate funded-debt obligations under a revolving credit facility, two tranches under Windstream’s term loan facility, one series of secured first lien notes, two series of secured second lien notes, six series of unsecured notes, and one issuance of secured subsidiary notes. All debt, other than the secured subsidiary notes, has been incurred by Debtor Windstream Services and its guarantor subsidiaries.

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The post Windstream Holdings – Files Technically Modified Plan and Voting Results in Advance of June 24th Confirmation Hearing, Will Ask Court to Cram Down Unsecured Noteholders appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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