Uniti Group Inc. Announces Pricing of Windstream Refinancing Transactions

Rhea-AI Summary

Uniti Group Inc. (Nasdaq: UNIT) announced the pricing of $800 million in new 8.250% Senior First Lien Notes due 2031 by Windstream subsidiaries. The indenture will allow for the collapse of Uniti's and Windstream's debt silos upon the closing of their planned merger. Concurrently, Windstream agreed to a $500 million incremental first lien term loan facility. Windstream will amend its credit agreement to permit the post-closing reorganization.

The offerings are expected to close on October 4, 2024. Windstream plans to use the proceeds to repay and refinance certain loans, and potentially invest in network expansion, including accelerating its Kinetic fiber-to-the-home buildout. The refinancing and amendments provide a clear path to collapsing the dual debt silos upon merger closing, strengthening Windstream's position in the residential fiber market.

Positive

• Successful pricing of $800 million in new Senior First Lien Notes
• Secured $500 million incremental first lien term loan facility
• Amendments to credit agreement allow for post-merger debt silo collapse
• Potential investment in network expansion and fiber-to-the-home buildout

Negative

• Increased debt load with new $800 million notes and $500 million term loan
• Higher interest rates on new debt (8.250% on notes, floating rate on term loan)

Insights

Financial Analyst

The pricing of $800 million in new senior notes and a $500 million incremental term loan facility for Windstream is a significant financial development. This refinancing, coupled with amendments to Windstream's credit agreement, paves the way for the collapse of Uniti and Windstream's debt silos upon their planned merger. This strategic move aims to streamline the combined entity's capital structure.

Key points to consider:

• The new 8.250% Senior First Lien Notes due 2031 and the floating rate term loan indicate a substantial debt restructuring.
• The amendments allowing for post-merger reorganization suggest improved flexibility in the combined company's financial structure.
• Windstream's intention to use proceeds for network investments and fiber-to-the-home buildout could potentially enhance long-term revenue streams and competitive positioning.

While this refinancing provides Windstream with more financial maneuverability, investors should monitor the impact on the combined entity's debt load and interest expenses post-merger. The success of the fiber expansion strategy will be important in justifying this increased leverage.

Telecommunications Industry Expert

The refinancing and planned merger between Uniti and Windstream represent a significant shift in the telecom infrastructure landscape. By collapsing the dual debt silos, the combined entity aims to create a more integrated and efficient operation, potentially leading to synergies and cost savings.

The focus on expanding Windstream's Kinetic fiber-to-the-home buildout is particularly noteworthy. This strategic move aligns with the industry trend towards high-speed fiber networks, which are important for meeting increasing bandwidth demands and competing in the residential broadband market.

Key considerations for investors:

• The accelerated fiber buildout could strengthen Windstream's market position, especially in underserved areas.
• Increased capital expenditure in fiber infrastructure may pressure short-term financials but could lead to long-term revenue growth and customer retention.
• The merger and debt restructuring could improve the combined entity's ability to compete with larger telecom players and cable operators.

While the strategy appears sound, execution risks remain, including potential integration challenges and the need to achieve sufficient returns on the fiber investments to justify the increased debt load.

Windstream Will Amend Credit Agreement to Allow Collapse of Dual Debt Silos Upon Closing of Planned Merger

LITTLE ROCK, Ark., Sept. 26, 2024 (GLOBE NEWSWIRE) -- Uniti Group Inc. (“Uniti”) (Nasdaq: UNIT) today announced the pricing of $800 million aggregate principal amount of new 8.250% Senior First Lien Notes due 2031 (the “New Windstream Notes”) by Windstream Services, LLC and Windstream Escrow Finance Corp. (collectively, the “Windstream Co-Issuers”), each a subsidiary of Windstream Holdings II, LLC (“Windstream”). The indenture governing the New Windstream Notes will contain provisions that allow for the collapse of Uniti’s and Windstream’s debt silos (the “Post-Closing Reorganization”) upon the closing of the planned merger between Uniti and Windstream. The offering of the New Windstream Notes is expected to close on October 4, 2024, subject to customary closing conditions.

Concurrently with the pricing of the New Windstream Notes, the Windstream Co-Issuers agreed to a $500 million incremental first lien term loan facility (the “First Lien Incremental Term Facility”) under Windstream’s existing credit agreement (the “Windstream Credit Agreement”). Loans under the First Lien Incremental Term Facility will bear interest based on a floating rate (which, at Windstream’s election, may be the Base Rate plus 3.75% or the Adjusted Term SOFR Rate plus 4.75% (each as defined in the Windstream Credit provided that the Adjusted Term SOFR Rate “floor” shall be 0%)) and will mature on October 1, 2031. In addition, Windstream agreed to amend the terms of the Windstream Credit Agreement to permit the Post-Closing Reorganization. The incremental term loan borrowings and amendments to the Windstream Credit Agreement are expected to close on October 4, 2024, subject to customary closing conditions. Upon the amendments becoming effective at closing, all outstanding Windstream indebtedness will permit the Post-Closing Reorganization.

Windstream intends to use the net proceeds from the offering of the New Windstream Notes and borrowings under the First Lien Incremental Term Facility to repay, refinance and reduce certain loans outstanding under the Windstream Credit Agreement and pay any related premiums, fees and expenses, including accrued and unpaid interest, if any. Any remaining proceeds will be used for general corporate purposes, which may include investments in Windstream’s network and other capital expenditures, such as expansion and acceleration of its Kinetic fiber-to-the-home buildout.

“The successful Windstream refinancing transactions, combined with the amendments to Windstream’s credit agreement, will provide a clear path to collapsing the dual debt silos upon closing of the merger between Uniti and Windstream. In addition, Windstream plans to use a portion of the proceeds from these financing activities to expand and accelerate their Kinetic fiber-to-the-home buildout, further strengthening their position within the residential fiber market,” commented Paul Bullington, Senior Vice President, Chief Financial Officer & Treasurer.

The Windstream Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and in offshore transactions to non-U.S. persons pursuant to Regulation S, each under the Securities Act.

This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, the New Windstream Notes issued pursuant to the offering of New Windstream Notes described above.

ABOUT UNITI

Uniti, an internally managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure, and is a leading provider of fiber and other wireless solutions for the communications industry. As of June 30, 2024, Uniti owns approximately 142,000 fiber route miles, 8.6 million fiber strand miles, and other communications real estate throughout the United States. Additional information about Uniti can be found on its website at www.uniti.com.

NO OFFER OR SOLICITATION

This communication and the information contained in it are provided for information purposes only and are not intended to be and shall not constitute a solicitation of any vote or approval, or an offer to sell or solicitation of an offer to buy, or an invitation or recommendation to subscribe for, acquire or buy securities of Uniti, Windstream or Windstream Parent, Inc., the proposed combined company following the closing of the Merger (as defined below) (“New Uniti”) or any other financial products or securities, in any place or jurisdiction, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made in the United States absent registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the contemplated Merger, New Uniti has filed a registration statement on Form S-4 with the SEC that contains a proxy statement/prospectus and other documents, which has not yet become effective. Once effective, Uniti will mail the proxy statement/prospectus contained in the Form S-4 to its stockholders. This communication is not a substitute for any registration statement, proxy statement/prospectus or other documents that may be filed with the SEC in connection with the Merger.

THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER CONTAINS IMPORTANT INFORMATION ABOUT UNITI, WINDSTREAM, NEW UNITI, THE MERGER AND RELATED MATTERS. INVESTORS SHOULD READ THE PROXY STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THE PROXY STATEMENT/PROSPECTUS AND SUCH DOCUMENTS, BEFORE THEY MAKE ANY DECISION WITH RESPECT TO THE MERGER.

The proxy statement/prospectus, any amendments or supplements thereto and all other documents filed with the SEC in connection with the Merger will be available free of charge on the SEC’s website (at www.sec.gov). Copies of documents filed with the SEC by Uniti will be made available free of charge on Uniti's investor relations website (at https://investor.uniti.com/financial-information/sec-filings).

PARTICIPANTS IN THE SOLICITATION

Uniti, Windstream and their respective directors and certain of their executive officers and other employees may be deemed to be participants in the solicitation of proxies from Uniti’s stockholders in connection with the Merger. Information about Uniti’s directors and executive officers is set forth in the sections titled “Proposal No. 1 Election of Directors” and “Security Ownership of Certain Beneficial Owners and Management” included in Uniti’s proxy statement for its 2024 annual meeting of stockholders, which was filed with the SEC on April 11, 2024 (and which is available at https://www.sec.gov/Archives/edgar/data/1620280/000110465924046100/0001104659-24-046100-index.htm), the section titled “Directors, Executive Officers and Corporate Governance” included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1620280/000162828024008054/unit-20231231.htm), and subsequent statements of beneficial ownership on file with the SEC and other filings made from time to time with the SEC. Additional information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Uniti stockholders in connection with the Merger, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in the proxy statement/prospectus and other relevant materials filed by New Uniti with the SEC. These documents can be obtained free of charge from the sources indicated above.

FORWARD-LOOKING STATEMENTS

This communication contains forward-looking statements, including within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by terms such as “may,” “will,” “appears,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern expectations, strategy, plans, or intentions. However, the absence of these words or similar terms does not mean that a statement is not forward-looking. All forward-looking statements are based on information and estimates available to Uniti and Windstream at the time of this communication and are not guarantees of future performance.

Examples of forward-looking statements in this communication (made at the date of this communication unless otherwise indicated) include, among others, statements regarding the Merger and the future performance of Uniti, Windstream and New Uniti (the “Merged Group”), whether Windstream amends the terms of its existing credit agreement, the implementation and expected effects of the Post-Closing Reorganization, the perceived and potential synergies and other benefits of the Merger, and expectations around the financial impact of the Merger on the Merged Group’s financials. In addition, this communication contains statements concerning the intentions, beliefs and expectations, plans, strategies and objectives of the directors and management of Uniti and Windstream for Uniti and Windstream, respectively, and the Merged Group, the anticipated timing for and outcome and effects of the Merger (including expected benefits to shareholders of Uniti), expectations for the ongoing development and growth potential of the Merged Group and the future operation of Uniti, Windstream and the Merged Group.

These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement and may include statements regarding the expected timing and structure of the Merger; the ability of the parties to complete the Merger considering the various closing conditions; the expected benefits of the Merger, such as improved operations, enhanced revenues and cash flow, synergies, growth potential, market profile, business plans, expanded portfolio and financial strength; the competitive ability and position of New Uniti following completion of the Merger; and anticipated growth strategies and anticipated trends in Uniti’s, Windstream’s and, following the expected completion of the Merger, New Uniti’s business.

In addition, other factors related to the Merger that contribute to the uncertain nature of the forward-looking statements and that could cause actual results and financial condition to differ materially from those expressed or implied include, but are not limited to: the satisfaction of the conditions precedent to the consummation of the Merger, including, without limitation, the receipt of shareholder and regulatory approvals on the terms desired or anticipated; unanticipated difficulties or expenditures relating to the Merger, including, without limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the Merger within the expected time period (if at all); potential difficulties in Uniti’s and Windstream’s ability to retain employees as a result of the announcement and pendency of the Merger; risks relating to the value of New Uniti’s securities to be issued in the Merger; disruptions of Uniti’s and Windstream’s current plans, operations and relationships with customers caused by the announcement and pendency of the Merger; legal proceedings that may be instituted against Uniti or Windstream following announcement of the Merger; funding requirements; regulatory restrictions (including changes in regulatory restrictions or regulatory policy) and risks associated with general economic conditions.

Additional factors that could cause actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements are detailed in the filings with the SEC, including Uniti’s annual report on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with the SEC.

There can be no assurance that the Merger will be implemented or that plans of the respective directors and management of Uniti and Windstream for the Merged Group, including the Post-Closing Reorganization, will proceed as currently expected or will ultimately be successful. Investors are strongly cautioned not to place undue reliance on forward-looking statements, including in respect of the financial or operating outlook for Uniti, Windstream or the Merged Group (including the realization of any expected synergies).

Except as required by applicable law, Uniti does not assume any obligation to, and expressly disclaims any duty to, provide any additional or updated information or to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. Nothing in this communication will, under any circumstances (including by reason of this communication remaining available and not being superseded or replaced by any other presentation or publication with respect to Uniti, Windstream or the Merged Group, or the subject matter of this communication), create an implication that there has been no change in the affairs of Uniti or Windstream since the date of this communication.

INVESTOR AND MEDIA CONTACTS:

Paul Bullington, 251-662-1512
Senior Vice President, Chief Financial Officer & Treasurer
paul.bullington@uniti.com

Bill DiTullio, 501-850-0872
Vice President, Investor Relations & Treasury
bill.ditullio@uniti.com

This press release was published by a CLEAR® Verified individual.

FAQ

What is the value and interest rate of the new Senior First Lien Notes issued by Windstream?

Windstream is issuing $800 million aggregate principal amount of new 8.250% Senior First Lien Notes due 2031.

When is the expected closing date for Windstream's refinancing transactions?

The refinancing transactions, including the new notes offering and credit agreement amendments, are expected to close on October 4, 2024, subject to customary closing conditions.

How will the proceeds from Windstream's refinancing be used?

The proceeds will be used to repay and refinance certain loans, pay related fees and expenses, and potentially invest in network expansion, including accelerating Windstream's Kinetic fiber-to-the-home buildout.

What is the significance of the credit agreement amendments for Uniti Group Inc. (UNIT)?

The amendments will allow for the collapse of Uniti's and Windstream's debt silos upon the closing of their planned merger, providing a clear path for post-merger financial integration.