19 February 2019 by lberuti
When US High Yield investors left for a long week-end on Friday, they were certainly not expecting the brutal punishment that was inflicted on WIN ( Winstream ) during today’s session. The very survival of the company is under threat after the surprise ruling late last week by a Manhattan federal court that it defaulted on its debt by spinning off Uniti Group Inc in 2015. It contends that some of WIN’s bondholders were unfairly stripped of assets that backed up their investment. The judgement was made on the back of an action undertaken by Aurelius Capital Management, but the $310mln awarded to the fund could only be the beginning. Other creditors could claim cross defaults on other parts of WIN’s debt which totals roughly $5.8Bln. The ruling means that creditors could ask their trustees to file notices to accelerate their debt and seek immediate repayment. WIN’s bonds were trashed, and the company’s 5-year risk premium reached 70% upfront. That means you have to pay 70cts upfront to insure $1 of WIN’s debt against a default within 5 years, and an additional 5cts per year. The market now assesses that WIN has only 1 in five chances to make it through the next 12 months.