Windstream ‘poisoned’ out of Embarq M&A, WSJ says

Did “poison puts” keep Windstream from being a serious bidder for Embarq last year?

The Wall Street Journal, citing anonymous sources, reports today that so-called “poison puts” — debt coventants that are triggered by mergers and acquisitions, sometimes requiring full repayment to lenders — prevented Windstream from participating in the final auction for Embarq’s assets.

In regulatory filings detailing its nearly $6-billion acquisition of Embarq, CenturyTel mentioned at least five other bidders swirling around the mid-sized telco last year as the economy quivered. Eventually CenturyTel locked into a final bidding showdown with another unnamed buyer. (Some speculate it might have been Frontier Communications.) Embarq has cited a handful of justifications for finally picking CenturyTel, including the carrier’s “investment-grade” credit position.

Windstream, meanwhile, has long cited the choppy debt markets as an impediment to much-needed M&A in the mid-tier telco market and questioned Embarq’s choice to do a deal in such a climate. However, analysts have recently noted signs that the credit market is loosening up for telecom carriers.

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