US telco and ISP Windstream has completed the spinoff of select telecoms network assets into an independent publicly-traded REIT Communications Sales and Leasing (CS&L).
The tax-free transaction saw Windstream shareholders receive one CS&L share for…
US telco and ISP Windstream has completed the spinoff of select telecoms network assets into an independent publicly-traded REIT Communications Sales and Leasing (CS&L).
The tax-free transaction saw Windstream shareholders receive one CS&L share for every five Windstream shares they held on 10 April, according to a company statement. NASDAQ set an ex-date of 27 April, meaning all trades through to 24 April carried the right to receive this distribution.
Windstream then conducted a one-for-six reverse split of its common stock, effective 26 April.
Like Windstream, CS&L is now trading on the NASDAQ stock exchange.
Windstream president and CEO Tony Thomas commented: “This innovative transaction has made Windstream a stronger company with less debt and increased capacity to invest in our network to provide advanced communication services to customers. I’m also excited about the growth prospects of CS&L.”
The Little Rock, Arkansas-based company said it expects the CS&L shares to be deposited into shareholders’ accounts by 30 April.
Following the spinoff, Windstream shareholders will receive a cash dividend of US$0.0659, which the company said represents a pro-rated US$0.25 dividend for the period of 1-24 April. From 25 April, giving effect to the one-for-six reverse stock split, Windstream expects to pay an annual dividend of US$0.60 per share.
Windstream will retain control of the spun-off infrastructure, which includes fibre and copper networks, through a long-term, triple-net lease with an initial rent payment of US$650m per year.
BofA Merrill Lynch and Stephens served as exclusive financial advisers to Windstream, while BofA ML and JP Morgan advised on the financing side. Skadden Arps Slate Meagher & Flom is serving as Windstream’s legal adviser.
As previously announced, Windstream board member Francis ‘Skip’ Frantz will become chairman of CS&L’s board.
Debt repayments
In connection with the spinoff, Windstream said it repaid US$2.4bn under its outstanding credit agreement.
The rural operator also received cash proceeds of US$1.035bn, which it expects to use to repay more debt over the next month.
Windstream will retain a 19.9% stake in CS&L under the terms of the spinoff, which will be used within the next 12 months to retire additional debt.
The company has also amended its credit agreements, which included extending the maturity date of a US$1.25bn revolving credit facility to 24 April 2020.
Announcing the planned spinoff in July 2014, Windstream said it expected the separation to cut its debt by US$3.2bn, thereby improving its free cash flow and lowering its debt-to-OIBDA ratio from 3.8x, as of Q1 2014, to 3.3x.
Debt redemption
Meanwhile, Windstream subsidiaries Windstream Services and Paetec Holding are calling for redemption of outstanding notes totalling US$850m on 27 May.
Windstream Services is calling for all of the US$400m outstanding principal amount of its 8.125% senior notes due 2018. The redemption price is equal to US$1,040.63 per US$1,000 of the notes plus interest.
Paetec is calling for all of the US$450m outstanding principal amount of its 9 7/8% senior notes due 2018 at a redemption price equal to US$1,049.38 per US$1,000 of the notes plus interest.
