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After all that.

An ugly court battle resulted in a corporate bankruptcy earlier this year, and now the hedge fund at the center of it has bought a stake in the spinoff of the company it bankrupted.

In February, a federal judge ruled that network communications company Windstream Holdings (ticker: WIN) violated bond covenants when it spun off its fiber-optic cable business into a new company, Uniti Group (UNIT) in 2015.

That ruling validated a 2017 claim brought by hedge fund Aurelius Capital Management, and caught substantially everyone but Aurelius by surprise. Later that month, Windstream filed for Chapter 11 bankruptcy protection ahead of debt maturities accelerated by that decision; it blamed Aurelius for the sorry outcome.

Shares of Uniti plummeted with the ruling, on speculation that it would be dragged down with Windstream, whose lease accounts for about 64% of Uniti’s revenue, according to Fitch Ratings.

But a recent regulatory filing shows that, as of March 31, Aurelius had purchased 1 million shares of Uniti—meaning it is betting on the assets that served as the lever in its case against Windstream.

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Uniti disclosed in a regulatory filing on May 9 that its auditor, PricewaterhouseCoopers, had expressed “substantial doubt” that it could continue as a going concern, according to a regulatory filing. The lack of a “going concern opinion” by March 31 would have constituted a breach of covenants and a default under a credit agreement, so Uniti got its lenders to waive that. But that amendment limited its ability to prepay other debt or pay out cash dividends in excess of 90% of its taxable income.

So Uniti said it would limit this year’s dividends to about $250 million. It already paid out about $110 million in January, it said in a separate filing. Over the next 4 quarters, dividends won’t exceed about $140 million. Last year it paid out about $435 million, it said.

That “going concern” problem and the “uncertain impact” from Windstream’s bankruptcy, spurred Fitch to downgrade Uniti’s issuer default rating to B, from B+, on March 7.

Shares fell, reaching $8.31 th at day, from $19.99 on Feb. 5.

Since then, the stock has recovered some, closing at $9.58 on Monday, down 0.3% on the day. On May 9, Uniti reported first-quarter earnings of 1 penny.

As Aurelius was buying, hedge fund Elliott Management was selling. The fellow distressed-debt brawler and former workplace of Aurelius’ founder had been on the other side of the Windstream battle, holding almost a 5% stake in Uniti. It exited that in the first quarter.

Representatives for Winstream, Uniti, Aurelius, and Elliott declined to comment.

Write to Mary Childs at mary.childs@barrons.com