Let me borrow a phrase from the famous Dutch soccer player Johan Cruijff: ‘Investing is simple, what’s difficult is to keep it simple.’
In the battle between Windstream (WINMQ), or Win, and Uniti (NASDAQ:UNIT) all investors want to know whether the lease was a lease or must be recharacterized as a loan. In the first week of March a trial is taking place and soon thereafter we will know who has won.
A win for Win will help especially the junior bondholders of Windstream who will then see their investments easily doubling in value. A win for Uniti will lead to a jump in the share price of Uniti, easily going back to the 11-12 range where the stock was trading before the lawsuit started. That is a nice 60% return and that is only the beginning. After Win leaves Chapter 11 Uniti will see even more gains.
So, the only thing we want to know is whether the master lease contract was a lease or a loan.
A loan or a lease?
To be quite frank, I don’t know what a lease is but I do know what a loan is. So I make our question simpler:
Was it a loan?
Having over ten year banking experience in fixed income structured finance I know a thing or two of loans and bonds. I know that a loan has an interest rate and a redemption schedule.
The dog that didn’t bark
Windstream in its complaint claims that the lease is a loan. Where do we find in the complaint the characteristics of this loan, i.e. the interest rate and the redemption schedule? It is absent. Why?
Let’s try on our own to find these by assuming there is an interest rate and redemption schedule of this loan. If we succeed it
