Windstream Holdings: It's a Wonderful Case

Abstract

In the classic holiday film, “It’s a Wonderful Life,” George Bailey, played by Jimmy Stewart, receives an unlikely Christmas gift: a glimpse of what the world would be like if he had never been born. The story has resonated with generations of viewers in large part because it is easy to empathize with the loyal, honest, and charming young president of Bailey’s Savings & Loan in Bedford Falls. But the story also resonates because its Depression-era backdrop plays so effectively to deep-seeded fears regarding economic collapse, financial instability, and the ways in which mankind responds to scarcity. Of course, these are also major themes of bankruptcy law. With or without a guardian angel by their side, parties to bankruptcy proceedings must grapple with and respond to scarcity, conflict, and uncertainty. This holiday season, a business reorganization case unfolding in the U.S. Bankruptcy Court for the Southern District of New York offers an opportunity to take up a bankruptcy-themed variation on the question that plagued George Bailey. The debtor is Windstream Holdings, Inc., which previously spun off its real estate assets to a separate entity called Uniti Group Inc. and then leased them back pursuant to a long-term master lease agreement. At the time, the sale and leaseback transaction provided an attractive alternative to traditional secured financing. In this issue of Bankruptcy Law Letter, we will consider how Windstream’s eventual bankruptcy case might have proceeded had Uniti never been born. As we will see, Windstream’s chosen recapitalization structure had profound implications for the company’s eventual bankruptcy, setting the case on a very different course than if the debtor had achieved a similar result through traditional financing. Just as George Bailey’s glimpse has helped countless viewers focus on what is most important in their own lives, a glimpse of what might have been for Windstream helps us to focus on the essential goals of bankruptcy law and policy.