Rural telecommunications company Windstream Holdings Inc. announced Monday that it filed for Chapter 11 bankruptcy after being hit with a $310 million judgment in a legal loss to a capital management firm.

The Arkansas-based company, which employs about 700 in Rochester and just over 1,000 in New York, recently lost a lawsuit concerning bond agreements with Aurelius Capital Management LP.

Aurelius, a Windstream bond holder, accused the company of violating its bond covenant when it spun off its copper wire and fiber cable business into a new company, Uniti Group, in 2015.

A U.S. district judge ruled in Aurelius’ favor earlier this month and awarded the hedge fund $310 million. At the time, Windstream postponed its fourth-quarter financial results and said it would appeal the decision.

The bankruptcy filing, which will allow the company to continue to operate while reorganizing its finances, is the right step to take for the company to mitigate the financial effects of the court decision, said Windstream President and CEO Tony Thomas in a news release.

“Taking this proactive step will ensure that Windstream has access to the capital and resources we need to continue building on Windstream’s strong operational momentum,” said Thomas. “We are confident that, upon completion of the reorganization process, we will be even better positioned to invest in our business, expand our speed and capabilities for our customers and compete for the long term.”

In its bankruptcy announcement, the company accused Aurelius of “predatory market manipulation to advance its own financial position,” and said the decision to file was not due to operational failures.

At the time of its legal win, Aurelius said it "took no pleasure in Windstream's resulting financial predicament," and said the company could have easily averted the situation by "not playing fast and loose with its noteholders in 2015," and by settling the case before it turned into a legal battle that dragged on for over a year.

Communications Workers of America released a statement Monday, saying it would protect the interests of its members and retirees within the Windstream ranks.

"CWA plans to take an active part in the Windstream bankruptcy process. We are assessing the details as they emerge and have retained an experienced law firm," wrote the group, which represents 1,200 active members at Windstream locations around the U.S.

Windstream operates in 18 states and employs 12,000 total employees.

Here’s what you should know about how this development could affect Rochester customers and jobs.

What will happen to Windstream customers?

At least in the near term, nothing will change for those who receive Windstream phone or internet services. Business will operate as usual throughout the bankruptcy process, according to a company spokesperson.

What about Windstream employees?

There will be few near-term impacts. The company said it does not anticipate restructuring operations at this point.

“Windstream is committed to Rochester and proud to serve our customers,” said Windstream spokesperson David Avery in a statement.

Will company stay here?

But in this case, given Windstream’s financial situation, Aurelius and other Windstream bondholders will become powerful actors in the future of the company, said Brighton Securities’ George Conboy. The company listed about $5.7 billion in debt as of September. The bankruptcy filing lists its debt at $11.2 billion, which includes a lease agreement with Uniti and other payables, said Avery.

A potential scenario may see bondholders combine Windstream with other telecom companies under their control, creating a telecom conglomerate. If that happens, the conglomerate will be operated where it is most efficient, and “that may not be Rochester,” said Conboy.

“There’s no way to know right now….but I think there’s a very strong chance that Aurelius (or another bond holder) could decide that this Rochester office is not something they need for their long term,” he said.

STADDEO@Gannett.com

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