Windstream (NYSE:WIN) may be buying up debt held by Fairpoint Communications (NYSE:FRP) as the latter faces the possibility of bankruptcy, according to the New York Post.
Windstream recently proposed raising $400 million in debt to fund two recent acquisitions, D&E Communications and Lexcom. And despite Windstream’s insistence that it doesn’t need to join in the large-scale M&A activity seen from peers like CenturyLink and Frontier, some analysts believe Windstream offered to acquire Frontier earlier this year, before that carrier bulked up with the purchase of Verizon assets.
Buying Fairpoint would push Windstream’s roughly 3 million access lines closer to 5 million, putting it more in league with CenturyLink and Frontier, which each have more than 7 million. But Windstream would have to untangle the same back-office messes that have brought Fairpoint to the brink of bankruptcy. And it would no doubt face heavy scrutiny from state regulators with little tolerance left for the negative effects of carrier M&A.
According to the Post, Windstream might also have to compete with private investors like John Paulson and Angelo Gordon, who have stocked up on a lot of Fairpoint’s bank debt.
Word has it that Centurylink is experiencing the same sort of back office turmoil with Embarq.