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Windstream: Its CSAL Transaction and Value in the Wireline Market

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Windstream’s major transaction

On June 15, 2016, Windstream Holdings (WIN) announced that it completed a major transaction for around half of the stake in CS&L (CSAL). According to the company, the transaction will transfer approximately 14.7 million shares of CS&L “common stock to its creditors in a debt-for-equity exchange.” On April 24, 2015, the spin-off of CS&L from Windstream was completed. Following completion of the CS&L transaction, Windstream owns ~10% of the company.

CS&L’s market capitalization was ~$4 billion as of June 15, 2016. According to Windstream, transferred CS&L shares “were used to retire approximately $309 million in Windstream’s revolving credit facility debt and satisfy transaction expenses.”

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Windstream’s scale

As of June 15, 2016, Windstream had a market capitalization of ~$0.86 billion. Meanwhile, in the US wireline space, Frontier Communications (FTR) and CenturyLink (CTL) had market caps of ~$5.7 billion and ~$14.9 billion, respectively.

Enterprise value multiples of Windstream and peers

As of June 15, 2016, Windstream had a next-year EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~7.6x. Meanwhile, Frontier and CenturyLink had multiples of ~5.1x and ~5.3x, respectively.

For a diversified exposure to Windstream, you could consider investing in the iShares US Telecommunications ETF (IYZ). Windstream made up ~2.9% of IYZ at the end of May 2016.

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