Windstream 2020 Bonds Offer 14% Yield To Maturity

Windstream Communications (WIN) has dealt with its share of unwelcome news over the past twelve months. The telecommunications company has faced a debt ratings downgrade and accusations of default against its bonds. The result is that Windstream bonds are trading at a discount. Even the company's next large maturity, its 2020 bonds are trading at under 88 cents on the dollar. Combined with a coupon of 7.75%, these bonds are offering nearly 14% yield to maturity. This discount presents an opportunity for investors to pick up yield, however, they should first understand the financial operation and its risks.

Source: FINRA
Windstream's first quarter earnings showed a modest improvement over the same quarter in 2017. The company grew revenues by almost $90 million to $1.45 billion. Operating expenses grew by less than revenue growth, which allowed the company to increase its operating income by $25 million to $69 million.

Source: SEC 10-Q
Windstream's balance sheet highlights the company's debt burden. The plethora of liabilities lies within the $5.9 billion in long-term debt and $4.6 billion in long-term lease obligations. In total, the company has a growing shareholder deficit of $1.3 billion. It is important to note for bondholders that the company's assets consist of more than $4.2 billion of intangible assets.

Source: SEC 10-Q
For Windstream to fund its debt load, the company will need to generate healthy cash flows.... Read more

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