Obviously, no one can be certain. However, I think that the very large volume days (one was 2.2 million shares, one around 900 thousand shares, etc) are due to equity swaps by institutions. Equity swaps allow the big shops to control shares in companies where they aren’t allowed to buy the shares outright (which would make sense in Windstream since it’s in Chapter 11 so many groups aren’t allowed to own the shares outright).
Some combination of reduction in the master lease rent to Uniti and a structured payout from Charter will levied a massive boost to Windstream’s free cash flow (which was already positive) and should create big value for commons (and keep them from being cancelled, although anything can happen in Chapter 11 so no way to guarantee this outcome). Windstream Investor Relations told me that the terms of the Charter settlement will not be disclosed, which leads me to believe that Windstream has been successful in their litigation against Charter. I think Windstream is all but guaranteed a big cut in master lease payment to Uniti but, once again, no guarantees on this. Despite the fact that Uniti is only showing around $35 million in quarterly net profit, Uniti is accounting for the Windstream master lease on a cash basis (and not a long term contract basis) so when a new long term lease is signed, from an accounting (net profit / loss) basis, this will improve the numbers for Uniti.
To me, the current low value in Windstream unsecured bonds is indicative of turmoil in the broader markets, coupled with the fact that many institutions can’t own any securities of companies in Chapter 11 rather than an indication of Windstream’s odds for all parties to be made whole.
The most recent monthly operating report showed Windstream’s revenue increased over the previous month, which would be great if it indicated a trend moving forward that their revenue is headed back up. The big net losses in these monthly operating reports are accounting related and not cash flow related.
The government bandwidth auctions that Windstream currently won (for $27 million), should be phenomenal investments in the long term, largely because Windstream operates in areas where they have very little competition.
The biggest value creator in Chap 11 for Windstream is the $3.2 billion in losses that they can carry forward indefinitely in the form of tax benefit.
Long story short, I think Windstream commons will be golden here in a few months but no way to know for sure.
