) intends to refinance $1 billion of its debt, maturing 2015.
Earlier this week, the company also announced refinancing for its
$1.1 billion term loan due in 2013. Given the company's balance
sheet position, which already remains highly leveraged due to new
debt issuances, might pose certain risks despite its
significance in maintaining liquidity.
Windstream seeks a total of $1.345 billion to refinance its
due maturities in 2013 and 2015. The company expects to enter
into term loans for repaying the existing debt by end of this
month subject to market conditions.
We believe that the company's increasing debt burden stems
from the on-going expansion plans. Acquisitions to expand its
coverage markets and subscriber count are vital for its survival
in an industry, which is undergoing consolidation. All these
activities have strained the balance sheet, as the company is
predominantly funding most of them through debt. Windstream had
approximately $7.8 billion in long-term debt at the end of
September 30, 2012.
However, windstream is making efforts to improve its balance
sheet profile by minimizing its debt position and enhancing the
liquidity profile. The company generated free cash flow of $669
million as of September 30, 2012. Further, with several
refinancing activities taking place and the ongoing deleveraging
plans, the company expects to save interest of more than $70
million in the coming months.
We are also impressed with the company's continued commitment
to maximize value for investors in the form of healthy dividend
payouts. The company returned $464.6 million and $509.6 million
to its shareholders in 2010 and 2011, respectively, through
dividend payments. As of September 30, 2012, the company made a
dividend payout of $441 million.
However, we remain on the sidelines given competitive pressure
from peers like
) and continued access-line erosion, which could pose significant
threat to the company.
Windstream has a Zacks Rank #4 (Sell). For the long term, we
have our Neutral recommendation on the stock.
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WINDSTREAM CORP (WIN): Free Stock Analysis
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