A few weeks short of fourteen months after spinning off CS&L as the industry’s first (and still only) network REIT, Windstream has disposed of half its remaining stake in the company. To be more specific, they did a debt-for-equity exchange with the CS&L shares, transferring them to creditors who sold them to Citigroup Global Markets, who then sold them to institutional investors led by Searchlight Capital Partners.
Windstream had held onto 20% of CS&L, but suggested at the time that they might indeed sell it later to further reduce debt. Indeed, the deal retired about $309M in Windstream’s revolving credit facility. They have been using funds from that credit facility to buy back debt at a discount in the open markets, retiring $126M in face value of debt for $100M, thus optimizing the debt reduction. As a result, they have reduced guidance for interest expense for the full year 2016 by $10M to $375M, and expect an incremental $25M next year. Some of that will surely come from the sale of the remaining 10% stake in CS&L, which amounts to 14.7M shares.
For CS&L, all this means is that Searchlight Capital now owns a big chunk of the company, and will be designating a member to the company’s board of directors. CS&L’s stock price had drifted downward throughout 2015 following the spinoff, but since the beginning of the year and the purchase of PEG Bandwidth, the stock price has risen steadily through the first half of the year and created a window of opportunity for Windstream.
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