Yes?
Did you get "the letter?"
Off I went to the mailbox yesterday to see what the advertisers of the world have that I can't possibly live without. At this time of the month, flyers, coupon sheets, and pitches for collectibles are about all I get. But there was just one lone envelope in the box. And it was a rather thick envelope considering who it was from: Windstream Holdings Inc. et al - 91664?
Okay, I got and paid the bill just last week. They've been pestering me to sign up for some new "blazingly fast speeds" service for a month now and I ain't biting (we'll save discussion on Windstream's blazingly fast speeds for another time). Now we have Windstream Holdings? What... they want to sell me stock?
Nosiree! This was to inform me that they just filed for Chapter 11 Reorganization... which I've always understood is a polite way of saying "we're bankrupt and getting a loan to hold off the wolves."
Now let me apologise right up front. This diary isn't to explain to any Windstream customers here what's going on or why. What I don't know about stocks, bonds, hedge funds and all that crap that crashed the economy ten years ago could fill the Grand Canyon - twice. What I do know about all of this is that I don't know enough about any of it to get involved with it ever again. My late husband rolled a 401K into an annuity in January 2007 that promptly lost half it's value by July 2008. By 2012 it still hadn't regained its initial value. But further investigation this morning offered a lot of clues that would probably make sense to someone who is familiar with all this stuff. So, if you are one of those people, here's what I've gleaned from a few quick reads.
The Motley Fool has an article about how both Windstream and a company I've never heard of called Uniti watched their stocks tank last July. And it mentions that "Windstream's financial troubles aren't exactly new." Hunh, well, it's news to me.
It was also news to me that Uniti "owns the network that Windstream uses to serve 1.4 million consumers and small businesses in 18 states and counts Windstream as its biggest customer." That from a Bloomberg article dated February 25, talking about how Windstream filed Chapter 11 bankruptcy on February 18. So yeah, they filed Chapter 11 last month and we the customers are just now hearing about it. The Bloomburg article also introduces another player into the game. Windstream filed, it enlightens, "after losing a court battle with Aurelius, the New York hedge fund, over whether Windstream defaulted on its bonds by spinning off Uniti Group Inc. in 2015."
There were no formal objections from creditors to the spinoff until 2017, when Aurelius sued and contended that Windstream had defaulted by unfairly stripping bondholders of assets that back up their investment. The verdict from Judge Jesse Furman this month supported Aurelius, and in turn entitled other creditors to demand immediate repayment of company loans and bonds, which total about $5.8 billion.
Debtholders and regulators may see the bankruptcy as further proof that narrow groups of investors are profiting improperly by using novel legal arguments to get defaults declared while simultaneously buying credit derivatives that pay off if a company goes bust. Tony Thomas, chief executive officer of Windstream, raised the issue in the company’s statement.
Yeah, despite once again hearing the term "credit default swaps," right about there is where I usually get lost in a morass of stock, bond and hedge fund lingo.
But Aurelius is apparently a hedge fund that specializes in "distressed debt." Furthermore its founder, former lawyer-turned-investor Mark Brodsky, is not exactly loved in the stealing each other's precious industry.
And in a business with no shortage of sharp elbows, Brodsky has some of the sharpest -- and he’s pretty good with them, too. Using novel legal theories and targeting gray areas in the law, he honed his investing approach in distressed debt working for a master, Elliott Management’s Paul Singer, and then took it to new heights at his own $3.4 billion firm, Aurelius Capital Management.
snip
Others have accused his New York-based firm of trying to “weaponize” bankruptcy law and to “extort value” from its financial positions. During an ugly, drawn-out legal battle against Argentina, Aurelius and Elliott were called financial terrorists by its president. And more recently, in Puerto Rico’s debt crisis, U.S. Senator Bernie Sanders lambasted hedge-fund creditors like Aurelius for being “morally reprehensible.”
Aurelius itself hasn't been doing too well these days though because, of all things, the reclusive founder and CEO got married last December. Not usually anyone's business, excepting maybe family, it was who he married that made investors skedaddle.
Eleanor Chan is Brodsky's top lieutenant.
Earlier this year (2018), Brodsky, 65, married Chan. She joined Aurelius as an analyst in 2005, a year after graduating from Yale, and rose through the ranks to managing director. She was named co-portfolio manager last year with David Tiomkin, who’s been with the firm for a decade. She’s one of five people, including Brodsky and Tiomkin, who make investment decisions at Aurelius.
snip
Pension plans and other large institutions have become more wary about family ties at hedge funds since Bernard Madoff’s Ponzi scheme came to light a decade ago, according to Ted Eichenlaub, a partner at ACA Compliance Group. Madoff employed several family members including his two sons, who were alleged by the trustee to have obstructed a regulatory probe that could have exposed the fraud earlier.
So this is a tangled web indeed. The very subject and my unfamiliarity with it might beg me to just file away "similar legal notices you may receive in the mail" from Windstream” and hope for the best. Except something nagged my memory this morning and a while ago I remembered what it was.
Net Neutrality.
Last year when the banishing of net neutrality was all the rage and everybody actually was raging about it. I checked in with Windstream. See, they're not just my phone company, they're also my broadband ISP. My broadband connection is the envy of many people around here who deal with other telecoms, or worse yet a local outfit that advertises broadband that's just a smidgen above dial-up. I also get Roku streaming service through Windy. So, when other telecom giants were salivating over Idjit Pie's new Internet free-for-all, I got curious about Windstream's policy.
Hmmm. So we have a telecom with over a million customers - mostly in rural areas - who isn't kowtowing to the creation of hierarchies on the Information Super Highway. We have a slight financial disaster compliments of a hedge fund operative who sounds like a cross between Bob Mercer, Vlad the Impaler, and a Resident facing a tough re-election season.
Nah, probably nuthin’ to see here.