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Windstream To Spin Off Assets Into Publicly Traded REIT

July 29, 2014
Windstream, a provider of advanced network communications, announced plans to spin off certain of its telecommunications network assets into an independent, publicly traded real estate investment trust (REIT).

The transaction would allow Windstream to reap significant tax savings by folding its existing fiber and copper network and other fixed real estate assets into a REIT, freeeing up capital to expand its network and diversify its assets through acquisitions.

The Little Rock, Arkansas-based company’s board of directors approved the plan after it received a favorable private letter ruling letter from the Internal Revenue Service.

"This transaction will make Windstream a more nimble competitor in today’s increasingly dynamic communications marketplace and accelerate our deployment of advanced communications services," said Jeff Gardner, president and CEO of Windstream. "Additionally, the REIT will have geographically diverse, high-quality assets and sustainable cash flows with the ability to grow and diversify over time."

After spinning off the assets to the REIT, Windstream plans to sign a long-term, triple-net exclusive lease covering the use of the assets with an initial estimated rent payment of $650 million per year.

As of year-end 2013, Windstream’s $14.3 billion in properties consisted primarily of land and buildings, office and warehouse facilities, central office equipment, software, outside plant and related equipment including aerial and underground cable, conduit, poles and wires. Buildings accounted for about $644 million of the total.

Windstream expects the REIT will raise approximately $3.5 billion in new debt, which will be used to repay existing Windstream debt to effect the transaction. As a result, Windstream said it expects to retire approximately $3.2 billion of debt as part of the transaction.

Pending approvals, Windstream anticipates that the spinoff would occur in the first quarter of 2015.

Fitch Ratings said it believes that the transaction improves Windstream's credit profile, based on prospects for improved free cash flow (FCF) and the potential for higher capital investment.

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