Aurelius Capital Management has issued a warning to its bondholders revealing that the proposed debt exchange by Windstream Holdings, Inc. (NASDAQ:WIN) might lead to contract violation.
Aurelius claims that the newly proposed debt exchange by Windstream might lead to a contract violation involving various bonds. Aurelius which is a hedge fund has a lot invested in Windstream and it currently has a large bond holding in the company. The capital management firm has advised the indenture trustee to hold off on the authentication of the new notes that the company has proposed to issue as part of the debt exchange.
Aurelius believes that the issuance of the proposed new notes will violate Section 4.09 of the Indenture which limits Windstream from such indebtedness. The hedge fund is also taking into account the fact that the company’s transaction in 2015 that is currently the focal point of a pending litigation led to a huge amount of debt.
The hedge fund thus argues that the consent application by Windstream seeking to amend the indenture is invalid because the consent is being pursued in violation of the Section 4.17 of the Indenture. The latter requires the company to provide equal consideration to all the stakeholders in a consent solicitation.
“Given its belief that the Indenture prohibits the proposed issuance of the New Notes, Aurelius has urged the indenture trustee not to authenticate them,” stated a Businesswire report.
Windstream has also expressed its disagreement with Aurelius’ stand over the matter. The hedge fund also plans to challenge the validity of the new notes if they are authenticated by the indenture trustee. For this reason, it might require the validity of the notes to be a matter that will be dealt with in court. Aurelius issued the bondholder notice specifically so that it could stop any holders of new notes from claiming that they acquired the new notes in good faith and without any notice since the notice has already been issued.
Windstream stock closed the latest trading session on Thursday at $1.85 after a 0.54 percent gain compared to the value of the stock during the previous close.