Communications services provider Windstream (NASDAQ: WIN) says it will create an independent, publicly traded real estate investment trust (REIT) that will own its existing copper and fiber-optic network and other fixed real estate assets. The scheme will facilitate network expansion and diversification through acquisitions, Windstream asserts.
"This transaction will make Windstream a more nimble competitor in today’s increasingly dynamic communications marketplace and accelerate our deployment of advanced communications services," said Jeff Gardner, president and CEO of Windstream. "Additionally, the REIT will have geographically diverse, high-quality assets and sustainable cash flows with the ability to grow and diversify over time."
The tax-free spinoff also will lower the company’s debt by about $3.2 billion and increase free cash flow, Windstream says. The REIT will raise approximately $3.5 billion in new debt, which will be used to repay existing Windstream debt, resulting in the debt decrease for Windstream.
The REIT will lease the network assets to Windstream via "a long-term triple-net exclusive lease" that will call for initial estimated rent payments of $650 million annually. Windstream will operate and maintain the assets. The REIT, meanwhile, will be free to lease its assets to others as well, as well as engage in acquisitions.
Windstream expects to leverage the new structure to expand availability of 10-Mbps Internet services to more than 80% of its customers by 2018, while availability of 24-Mbps Internet services would more than double during the same time frame, expanding to more than 30% of its customer base.
The spinoff should occur in the first quarter of 2015, following receipt of the necessary regulatory approvals and successful completion of other customary conditions.
Windstream’s CFO Tony Thomas, will become CEO of the REIT, while Francis X. "Skip" Frantz, a Windstream director, will serve as chairman of the REIT’s board.
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