236

I7OAUSB1ps

1 UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
2 -----------------------------------------x

3 U.S. BANK NATIONAL

ASSOCIATION, solely in its
4 capacity as indenture trustee
of Windstream Services, LLC's
5 6 3/8% Senior Notes due 2023,

6 Plaintiff and
Counterclaim Defendant, New York, N.Y.
7
v. 17 Civ. 7857 (JMF)
8
WINDSTREAM SERVICES, LLC,
9
Defendant, Counterclaim
10 Plaintiff, and
Counterclaim Defendant,
11
v.
12
AURELIUS CAPITAL MASTER, LTD.,
13
Counterclaim Defendant
14 and Counterclaim Plaintiff.

15
-----------------------------------------x
16
July 24, 2018
17 9:30 a.m.

18 Before:

19 HON. JESSE M. FURMAN,

20 District Judge

21 APPEARANCES

22 FRIEDMAN KAPLAN SEILER & ADELMAN LLP

Attorneys for U.S. Bank National Association
23 BY: EDWARD A. FRIEDMAN
DANIEL B. RAPPORT
24 JEFFREY FOURMAUX
CHRISTOPHER COLORADO
25 BLAIR ALBOM

SOUTHERN DISTRICT REPORTERS, P.C.

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I7OAUSB1ps

1 APPEARANCES CONTINUED

2 MASLON EDELMAN BORMAN & BRAND LLP

Attorneys for U.S. Bank National Association
3 BY: MICHAEL C. McCARTHY

4 KIRKLAND & ELLIS LLP

Attorneys for Windstream Services, LLC
5 BY: RICHARD GODFREY
AARON MARKS
6 IAN SPAIN
HARIKLIA KARIS
7 RICHARD U.S. HOWELL

8 ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER & SAUBER LLP

Attorneys for Aurelius Capital Master
9 BY: WILLIAM TRUNK
LAWRENCE ROBBINS
10 JEFFREY KANE
WENDY LIU
11

12 (Trial resumed)

13 THE COURT: I hope everyone is well and everyone had a

14 restful evening. A couple things. One is, I assume you saw my

15 order yesterday that we will sitting a longer day tomorrow. So

16 hopefully that resolves whatever the scheduling issue was and,

17 in any event, will let us make some more progress.

18 Second, you may notice that Ms. Smallman is out today.

19 She wasn't feeling well. So forgive us in advance when things

20 go awry, as they will obviously do when she is not here.

21 With that, is there anything for us to discuss before

22 we proceed?

23 MR. GODFREY: No, your Honor. I think that scheduling

24 issue is resolved by it, as we understand the schedule

25 currently. There is still a possibility that we flip a

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I7OAUSB1ps Solomon - direct

1 witness, but it would be on the same day. So I think the

2 schedule appears to us to have resolved itself with the

3 elongated day tomorrow. Thank you very much for that.

4 THE COURT: All right. Very good. Just for your

5 planning purposes, I would anticipate that we'll take our

6 half-hour break at about 11:45 today. That will depend on

7 where we reach a natural breaking point.

8 If we don't have anything to discuss, Mr. Solomon, if

9 you want to step up here to the witness stand. And if you

10 could remain standing, raise your right hand.

11 SAUL SOLOMON,

12 called as a witness by the defendant,

13 having been duly sworn, testified as follows:

14 THE COURT: All right. You may proceed.

15 DIRECT EXAMINATION

16 BY MR. HOWELL:

17 Q. Mr. Solomon, you have a couple of binders in front of you.

18 MR. HOWELL: Your Honor, may I approach the witness to

19 hand him his affidavit?

20 THE COURT: You may. I assume these binders up here

21 are mine?

22 MR. HOWELL: Yes, your Honor.

23 THE COURT: I'm accumulating binders at a rapid clip.

24 MR. HOWELL: Thank you, your Honor.

25 I'm afraid the binder proliferation trend is not

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I7OAUSB1ps Solomon - direct

1 likely to stop.

2 Q. Mr. Solomon, I have handed you what has been marked as WIN

3 Exhibit No. 192. Do you recognize this document as an

4 affidavit you prepared in this case?

5 A. Yes, it is.

6 Q. Are the statements in your affidavit true and accurate to

7 the best of your knowledge?

8 A. Yes, they are.

9 Q. As you sit here today, is there anything you would like to

10 change in your affidavit?

11 A. No.

12 MR. HOWELL: Your Honor, I will submit WIN Exhibit

13 No 192 into evidence.

14 THE COURT: There being no objections, it is admitted.

15 I did have two just clarifying questions, either for

16 counsel or for Mr. Solomon. The first is, in footnote 26, I

17 think it's in about paragraph 25, there is a citation to WIN

18 and then a Bates number. Does anyone know what the trial

19 exhibit number of that is, or if you don't know it offhand, can

20 somebody figure that out and tell me?

21 MR. HOWELL: We will get that for you, your Honor.

22 THE COURT: Great.

23 And, second -- this is directed at Mr. Solomon -- in

24 paragraph 50, there is a reference to a Mr. Vargo, but I don't

25 think he is identified elsewhere in your affidavit. Can you

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1 tell me who that is.

2 THE WITNESS: Yes. I believe his title is director of

3 financial reporting for Windstream.

4 THE COURT: All right. Thank you. It is admitted.

5 (Defendant's Exhibit WIN 192 received in evidence)

6 THE COURT: I should also note, as with every other

7 witness, to the extent that the witness offers legal

8 conclusions, I will not be -- I will make my own legal

9 conclusion. Let me put it that way.

10 MR. HOWELL: Understood.

11 Your Honor, at this time I would like also to move the

12 Court, under Rule 702, to recognize Mr. Solomon as an expert in

13 the fields of financial accounting, financial auditing, GAAP,

14 and financial reporting, based on the qualifications,

15 education, and experience that is set forth in paragraphs 1

16 through 8 of his affidavit, as well as in Mr. Solomon's CV and

17 trial testimony that are Exhibits A and B to his affidavit.

18 THE COURT: Any objections?

19 MR. RAPPORT: No objection, your Honor.

20 THE COURT: He is so qualified.

21 MR. HOWELL: Now, your Honor, we were informed a few

22 minutes ago that the U.S. Bank does not intend to cross-examine

23 Mr. Solomon, so a few points I would like to raise related to

24 that. The first is, as a housekeeping issue, I would like to

25 move Exhibit 189, that was used during Dr. LaRue's

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1 cross-examination, into evidence.

2 THE COURT: All right. I understand that that is not

3 subject to the parties' stipulation.

4 MR. RAPPORT: Well, we had agreed that it could be

5 used with respect to Dr. LaRue but not with respect to

6 Mr. Solomon. This was not a source that Mr. Solomon cited in

7 either his expert report or his affidavit.

8 THE COURT: I don't think Mr. Howell is proposing that

9 it be used with respect to Mr. Solomon. He is offering it. So

10 is there an objection to --

11 MR. RAPPORT: At this point, with that understanding,

12 no, your Honor.

13 THE COURT: All right. So it is admitted by

14 agreement.

15 (Defendant's Exhibit 189 received in evidence)

16 THE COURT: Next.

17 MR. HOWELL: The second point, your Honor, is,

18 obviously, Mr. Solomon is here and available for any questions

19 that your Honor may have. As you know, Mr. Solomon offers the

20 rebuttal report to Dr. LaRue's conclusions, and I wanted to

21 make sure that if your Honor had any questions, the Court had

22 the opportunity to ask Mr. Solomon those questions.

23 THE COURT: I am aware that he is here.

24 Let me think about, since the lack of cross definitely

25 is not what I was anticipating myself. So give me a moment.

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1 Anything else, or you --

2 MR. HOWELL: My last point, given the colloquy we've

3 had with Mr. Rapport, given the objection, is, I would like to

4 ask Mr. Solomon a few questions in rebuttal to Dr. LaRue's

5 testimony regarding Exhibit 189 during his cross-examination

6 testimony.

7 MR. RAPPORT: We obviously object to that, your Honor.

8 If they wanted to supplement or amend or add to his

9 direct-testimony affidavit, they could have done that a long

10 time ago. They produced this document to us on Saturday. I

11 think this is an inappropriate attempt to amend his direct-

12 testimony affidavit.

13 MR. HOWELL: A couple of points in response if I may.

14 First, the document was used by me on cross-examination of

15 Dr. LaRue, and then U.S. Bank, in my view, opened the door by

16 asking him questions additionally about that document.

17 Secondly, I think, given the procedural posture of this case,

18 which is perhaps a bit unusual -- normally U.S. Bank would have

19 the burden, would go first, put their case forward, put their

20 expert forward. Mr. Solomon is a rebuttal expert to Dr. LaRue.

21 And Dr. LaRue, had he simply said, yes the document says what

22 it says, as he said in cross examination yesterday, I may not

23 be able to go into questions about that. But that's not all

24 that he said. Instead he gave multiple statements related to

25 the document during his redirect examination, and I believe

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1 under any other procedural posture, we should have the ability

2 to have Mr. Solomon address those issues.

3 THE COURT: The objection is sustained.

4 Next.

5 MR. HOWELL: I otherwise pass the witness to no cross.

6 THE COURT: To me, I guess.

7 I don't think that I feel the need to ask any

8 questions myself. So I think we're good to go.

9 In that case, Mr. Solomon, it was a pleasure.

10 MR. HOWELL: Only a brief redirect, your Honor.

11 THE COURT: All right. At least I got some binders

12 out of it.

13 You can leave those there. Counsel will recover them.

14 THE WITNESS: Thank you.

15 MR. GODFREY: We will track down the exhibit number

16 for the footnote reference that you asked for and give it to

17 the Court after the lunch hour, your Honor.

18 THE COURT: Thank you.

19 (Witness excused)

20 THE COURT: All right. The next witness is

21 Mr. Gunderman; is that correct?

22 MRS. KARIS: That is correct, your Honor.

23 MR. HOWELL: May I approach to get the binder?

24 THE COURT: You may.

25 MRS. KARIS: Your Honor, may I get Mr. Gunderman and

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1 also the binders that go with Mr. Gunderman?

2 MR. GODFREY: Obviously Mrs. Karis is taking Mr.

3 Gunderman.

4 THE COURT: I figured that. Why doesn't somebody

5 bring the binders up while she retrieves it.

6 MRS. KARIS: May I proceed, your Honor?

7 THE COURT: You may.

8 MS. KARIS: Good morning, Mr. Gunderman.

9 Your Honor, we have submitted to the Court in all

10 those binders the direct testimony of Mr. Gunderman as well as

11 the accompanying exhibits. If I could approach Mr. Gunderman

12 and give him just his affidavit at this time.

13 THE COURT: You may.

14 MRS. KARIS: Thank you.

15 (Pause)

16 MRS. KARIS: Your Honor, I was just informed that

17 Mr. Gunderman has not been sworn in yet. So would you like me

18 to wait for that?

19 THE COURT: That would be a good idea. It's a perfect

20 example of Ms. Smallman's absence. Ms. Smallman will be very

21 amused to hear that I forgot.

22 ROBERT GUNDERMAN,

23 called as a witness by the defendant,

24 having been duly sworn, testified as follows:

25 THE COURT: All right. Now you may proceed.

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I7OAUSB1ps Gunderman - direct

1 MRS. KARIS: Thank you, your Honor.

2 THE COURT: Thank you for the reminder.

3 MRS. KARIS: No problem.

4 DIRECT EXAMINATION

5 BY MRS. KARIS:

6 Q. Good morning, Mr. Gunderman.

7 A. Good morning.

8 Q. I have handed you there what is marked as Exhibit 193,

9 which is the affidavit you submitted in this case as direct

10 testimony. I'm going to ask you first to look to the last page

11 of that affidavit. Do you recognize the signature on that

12 page?

13 A. I do.

14 Q. Is that your signature?

15 A. Yes.

16 Q. And did you sign that affidavit under the penalties of

17 perjury as you understood them?

18 A. Yes.

19 Q. In that affidavit, which sets forth your direct testimony,

20 are the statements that you make in there based on your own

21 personal knowledge?

22 A. Yes.

23 Q. And to the best of your knowledge, are all the statements

24 in your affidavit true and correct?

25 A. Yes.

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1 Q. Is there anything you wish to change or revise that is in

2 your affidavit?

3 A. No.

4 Q. Thank you.

5 MRS. KARIS: At this time, your Honor, we would offer

6 Exhibit 193 as Mr. Gunderman's direct testimony.

7 THE COURT: All right. So, number one, I want to make

8 sure we're all on the same page. My understanding is that the

9 trustee will cross-examine, and then Aurelius is going to

10 cross-examine with respect to the second half of his affidavit.

11 Is that correct?

12 MR. FRIEDMAN: Yes, your Honor.

13 THE COURT: All right. I understand there are no

14 objections to the trustee portion, if you will, the beginning,

15 so obviously that is admitted. The objections with respect to

16 the Aurelius portion, if I can call it that, are overruled. As

17 I indicated, to the extent that there are relevance objections,

18 I will decide the relevance if any of testimony in connection

19 with my ultimate ruling. So it is admitted.

20 (Defendant's Exhibit 193 received in evidence)

21 MRS. KARIS: Very well. Thank you, your Honor.

22 At this time I pass Mr. Gunderman.

23 THE COURT: All right. Mr. Friedman.

24 MR. FRIEDMAN: Thank you, your Honor.

25 CROSS-EXAMINATION

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1 BY MR. FRIEDMAN:

2 Q. Good morning, Mr. Gunderman.

3 Reading your affidavit, you have statements about

4 testimony you gave in the Kentucky proceedings -- that is,

5 proceedings in Kentucky -- before the public service

6 commission, correct?

7 A. Correct.

8 Q. You were testifying under oath in those proceedings,

9 correct?

10 A. Right.

11 Q. You were being asked questions and you gave answers,

12 correct?

13 A. Correct.

14 Q. And there's one question and answer in particular where,

15 with the benefit of hindsight, your thinking is that you would

16 like to have given a different answer. Is that correct?

17 A. I oversimplified my original answer.

18 Q. Can you answer my question yes or no? And I'm going to say

19 it again. With the benefit of hindsight, is your thinking

20 today that you should have given a different answer to the

21 question that was asked?

22 A. No.

23 Q. So with the benefit of hindsight, you would have provided

24 the same answer to that question that you did provide when you

25 were being asked, correct?

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1 A. Yes.

2 Q. I'd like to show you that question and answer. It is PX 21

3 at page 26. Let me just read the question and the answer. The

4 question asked of you, Mr. Gunderman, was, "So, now, will there

5 be an agreement between the Kentucky ILECs and that CSL

6 Kentucky subsidiary?" That was the question you were asked,

7 correct?

8 A. Yes.

9 Q. And let me pause there. When we say "Kentucky ILECs," as

10 used in that question, those are Kentucky transferor

11 subsidiaries, correct?

12 A. Yes.

13 Q. And am I also correct that "CSL Kentucky subsidiary" is one

14 of the CSL subsidiaries that received a transfer of assets in

15 the April 24, 2015 transaction?

16 A. Yes.

17 Q. In your answer to the question, you say, "The agreement

18 will be between CSL at the corporate entity level as well as

19 Windstream Holdings, Inc., and it's just for administrative

20 ease in terms of transacting -- transacting the lease between

21 the entities --" and then there's a little bit of an

22 interruption. And then your answer continues: " -- for the

23 benefit -- for the benefit of the operating subsidiaries of

24 Windstream to include Kentucky East and West."

25 I did read your answer correctly?

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1 A. Yes.

2 Q. And that's the answer you would provide to that question,

3 with the benefit of hindsight. That's correct?

4 A. Yes.

5 Q. Now, let me ask you a little bit about your understanding

6 of the lease arrangement and what the basic structure and

7 understanding was on your part of that arrangement. I'm going

8 to show you PX 15, which is the application that was filed by

9 the Kentucky transferor subsidiaries before the Kentucky Public

10 Service Commission.

11 MR. FRIEDMAN: So, Joe, you can actually maybe move

12 over this testimony so we can keep it, and can we put up PX 15

13 at paragraph -- let's start with the cover.

14 Q. You see PX 15, Mr. Gunderman?

15 A. Yes.

16 Q. You recognize that as the application that was filed by the

17 Kentucky transferor subsidiaries?

18 A. Yes.

19 Q. You read this application before you testified, correct?

20 A. Yes.

21 Q. So let me call your attention to paragraph 21 of PX 16.

22 MR. FRIEDMAN: Can we bring that up, please, Joe.

23 Did I say PX 15? The same Kentucky application.

24 Q. So paragraph 21, as you see, contains a description of the

25 lease. Is that correct?

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1 A. Yes.

2 Q. And the first sentence there says, "The lease of the

3 subject assets for the benefit of the operating companies will

4 be an exclusive, long-term master lease that will be in effect

5 for up to 35 years." And that's defined as "the lease." Do

6 you see that?

7 A. Yes.

8 Q. And is that sentence an accurate statement regarding the

9 lease, as you understand it?

10 A. Yes.

11 Q. The second sentence says, "The lease will provide the

12 operating companies with exclusive rights to use the

13 distribution systems as well, to access and affix

14 communications electronics, switching, or other equipment to

15 the distribution systems for the provision, routing, and

16 delivery of voice, data, and other communications services."

17 Is that an accurate statement of the lease to your

18 understanding?

19 A. Yes.

20 Q. And you understand the operating companies are transferor

21 subsidiaries, correct?

22 A. Correct.

23 Q. And you understand that the lease will provide the

24 transferor subsidiaries with exclusive rights to use the

25 distribution systems, correct?

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1 A. Yes.

2 Q. That was part of the plan, correct?

3 A. Yes.

4 Q. The third sentence says, "The operating companies'

5 exclusive usage rights will include the right to provide

6 communications services or sublease access to the system." Do

7 you see that sentence?

8 A. Yes.

9 Q. Does that sentence reflect accurately your understanding of

10 what the operating companies' rights will be?

11 A. Yes.

12 Q. Let me ask you to go back to paragraph 16 of this same

13 application for a moment. You see the heading "the CSL

14 entities," Mr. Gunderman?

15 A. Yes.

16 Q. The first sentence under that heading reads, "CSL is a

17 newly formed Delaware corporation. Immediately upon the

18 transfer of the subject assets to CSL, or to one of its

19 wholly-owned direct or indirect subsidiaries, CSL (or the

20 subsidiary) will become the owner of the subject assets and

21 will lease the subject assets back to Holdings on a long-term,

22 exclusive basis for the benefit of the operating companies so

23 that the operating companies can continue to operate their

24 telecommunications business as they do currently." Does that

25 sentence that I just read accurately describe the lease and the

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1 arrangement that was being put into place by Windstream?

2 A. Yes.

3 Q. And am I correct that in applications filed in numerous

4 states, the transferor subsidiaries stated to the regulators

5 that a lease signed by Holdings would be for the long-term

6 exclusive benefit of the transferor subsidiaries?

7 A. Yes.

8 Q. And you understood that that was a basic aspect of the

9 structure being planned by Windstream, correct?

10 A. Yes.

11 Q. That the lease would be signed by Holdings but it would be

12 for the long-term exclusive benefit the transferor

13 subsidiaries, correct?

14 A. Yes.

15 Q. Now let me turn in this Kentucky application to paragraph

16 44, please. So the highlighted sentence in paragraph 44 says,

17 "under the terms of the exclusive lease from CSL, the operating

18 companies will be responsible for the operation and maintenance

19 of the subject assets and will continue to have responsibility

20 for quality of service standards and fulfillment of all

21 regulatory obligations." Do you see that sentence describing

22 the terms of the exclusive lease?

23 A. Yes.

24 Q. And does that sentence comport with your understanding of

25 what was being provided for in the lease that was being signed

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1 by Holdings?

2 A. Yes.

3 Q. Now, as part of the arrangement being put into place by

4 Windstream with respect to the master lease, it was understood

5 that the transferor subsidiaries would be funding the rent

6 payments that Holdings was agreeing to pay to CSL; is that

7 correct?

8 A. Yes.

9 Q. Now, you gave your testimony -- we still have it up -- keep

10 it all up, please -- you gave your testimony -- page 26 is

11 highlighted -- that was November 13 in Kentucky, correct?

12 A. Yes.

13 Q. Do you recall -- let me just ask you this question.

14 Windstream had numerous lawyers involved in this whole process

15 of submitting applications and follow-up to the applications,

16 correct?

17 A. I don't recall the attorneys. I wasn't principally

18 responsible for all the applications.

19 Q. In connection with your involvement in the Kentucky

20 proceedings, am I correct that you had meetings with attorneys?

21 A. Yes.

22 Q. You had meetings with attorneys to prepare for the

23 testimony you gave on November 13, correct?

24 A. Yes.

25 Q. And those attorneys included lawyers from a law firm and

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1 also Mr. Fletcher; is that correct?

2 A. Yes.

3 Q. And do you recall that, after you provided this testimony

4 that we have on page 26, there was a time subsequently when you

5 provided written responses to questions from the Kentucky

6 Public Service Commission?

7 A. As I sit here today I don't recall that, but if it happened

8 it happened.

9 Q. Let me --

10 MR. FRIEDMAN: Again, Joe, we can keep the testimony

11 here because we may need it, but could you also bring up,

12 please, PX 23.

13 Q. Now, PX 23, you see, Mr. Gunderman, is the transferor

14 subsidiaries' responses to post-hearing data requests? Do you

15 see that?

16 A. Yes.

17 Q. Does looking at that document refresh your recollection

18 that you provided written responses about a week after your

19 oral testimony?

20 A. No.

21 MR. FRIEDMAN: Joe, I just want to go to the next --

22 oh, wait. There's a verification page. Can we go to the

23 verification page. There we go.

24 Q. This is part of PX 23, Mr. Gunderman. Do you see it's

25 headed "Verification," and it says that "I, Robert E.

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1 Gunderman," etc., "after being duly sworn," etc., and that's

2 your signature, correct?

3 A. Yes.

4 Q. Does seeing your verification as part of PX 23 refresh your

5 recollection that you provided written responses to questions

6 in the Kentucky proceeding about a week after your oral

7 testimony?

8 A. Yes.

9 Q. And before you provided the written responses, did you have

10 an opportunity to review them for accuracy?

11 A. I'm sure I did.

12 Q. And did you consult with attorneys for Windstream about the

13 written responses before you signed this verification?

14 A. I would expect that I did.

15 Q. And did the attorneys participate with you in the drafting

16 of the written responses that you provided?

17 A. I would expect they did, yes.

18 Q. So let me show you, please, one of the questions and your

19 response.

20 MR. FRIEDMAN: Joe, we could please go to the last

21 page of the exhibit.

22 Q. So we see there request no. 6 and your response. Do you

23 see it says "Witness: Robert E. Gunderman" at the bottom?

24 A. Yes.

25 Q. And the question is, "How will the assets to be transferred

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1 from Windstream Kentucky East and Windstream Kentucky West to

2 CSL be booked for ratemaking purposes?" You see that question?

3 A. Yes.

4 Q. And do you see -- well, the first sentence says, "The value

5 of the assets transferred will not change as a result of the

6 transaction." Do you see that?

7 A. Yes.

8 Q. And then the second sentence in your response says, "The

9 assets to be transferred will be leased back to the

10 applicants." Do you see that?

11 A. Yes.

12 Q. That statement that I just read is a statement that you

13 provided to the Kentucky Public Service Commission under oath

14 on November 21, a week after your oral testimony. Correct?

15 A. Yes.

16 Q. And at the time you provided it, you believed that the

17 statement, "The assets to be transferred will be leased back to

18 the applicants" was an accurate summary or characterization of

19 the transaction that was occurring, correct?

20 A. Yes.

21 MR. FRIEDMAN: Now, we can take down 23. Leave up the

22 testimony, please.

23 Q. You explained with reference to the oral testimony you

24 gave -- sorry. Let me just back up before asking you about

25 administrative ease. You read the complaint in this action,

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1 after responding, correct?

2 A. Yes.

3 Q. And you knew that, in the complaint, the statement that you

4 just, you provided in the written response in PX 23, that sworn

5 statement by you was quoted in the complaint. Do you recall

6 that?

7 A. I don't recall that as I sit here today, but if it's in

8 there, then I'm sure you said it.

9 Q. And you would agree with me that your direct-testimony

10 affidavit in this case does not say anything about that sworn

11 written statement you provided, the one I read from, PX 23,

12 correct?

13 A. Correct.

14 Q. Your affidavit focuses on the answer you gave containing

15 the words "administrative ease." Correct?

16 A. Correct.

17 Q. And let me just ask you a little bit about that. First of

18 all, in your direct testimony discussing your answer about

19 administrative ease, you say that having Holdings rather than

20 the subsidiaries execute the master lease, quote, was not just

21 for administrative ease, close quote. Is that your testimony?

22 A. Yes.

23 Q. And when you say that have Holdings sign the lease rather

24 than the transferor subsidiaries was not just for

25 administrative ease; you are telling us that there was another

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1 reason, or other reasons, in addition to administrative ease.

2 Is that correct?

3 A. Yes.

4 Q. And your affidavit talks about what those other reasons

5 were. Correct?

6 A. Yes.

7 Q. Now, you talk in your affidavit, in discussing other

8 reasons why Holdings signed the master lease, you say that

9 allows Services to preserve maximum flexibility for

10 administering lease obligations. Correct?

11 A. Correct.

12 Q. And would you agree with me that, when it comes to the

13 performance of lease obligations, regardless of whether

14 Holdings signed the lease or the transferor subsidiaries signed

15 the lease, the transferor subsidiaries are the only Windstream

16 entities with the regulatory authority to use the leased

17 property?

18 A. That's -- I don't have a recollection of the details of

19 that. It would be my expectation that the transferor

20 subsidiaries would continue to fulfill the regulatory

21 obligations.

22 Q. And would continue to use the leased property to engage in

23 their businesses, correct?

24 A. Correct.

25 Q. And you would agree that even though Holdings signed the

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1 master lease, the transferor subsidiaries have the exclusive

2 right to use the leased property. Correct?

3 A. Correct.

4 Q. And even though Holdings signed the lease, the transferor

5 subsidiaries are responsible for the operation and maintenance

6 of the leased property. Correct?

7 A. Correct.

8 Q. At the present time would you agree with me the transferor

9 subsidiaries need the leased property to operate their

10 business, correct?

11 A. Yes.

12 THE COURT: By "present time" do you mean today or the

13 time of the transaction?

14 MR. FRIEDMAN: Thank you, your Honor.

15 Q. From the time of the transaction to the present, at all

16 times, the transferor subsidiaries had needed the leased

17 property to operate their business. Correct?

18 A. Yes.

19 Q. Now, I want to just probe a little more on flexibility and

20 the other reasons you state. Do I remember correctly that you

21 say something in your direct-testimony affidavit about having

22 Holdings sign the lease results in the obligation in the lease

23 being junior to other obligations of the Windstream Companies?

24 A. Yes.

25 Q. So would you agree that because of the importance of the

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1 leased property to Windstream's business, the payments required

2 to be made under the lease are among Windstream's highest-

3 priority cash payments?

4 A. Yes.

5 Q. And would you agree that the rent obligations under the

6 master lease are effectively senior obligations of Windstream?

7 A. Could you be more specific on what you mean by

8 "Windstream"?

9 Q. If we look at the Windstream Companies as a whole, would

10 you agree with me that, if the rent payments due to CSL are not

11 made, CSL would have the right under the master lease to take

12 steps that could put the Windstream Companies out of business?

13 MRS. KARIS: Objection, your Honor. It calls for a

14 legal conclusion.

15 MR. FRIEDMAN: I'm asking, if I may, your Honor, I'm

16 asking this witness's understanding of the arrangements that

17 were put into place.

18 THE COURT: Overruled.

19 MR. FRIEDMAN: Would you like the question read back?

20 THE COURT: Please.

21 MR. FRIEDMAN: So the question I was asking you is --

22 THE COURT: Move the microphone over, please.

23 MR. FRIEDMAN: Oh, I apologize, your Honor.

24 THE COURT: You can use that one if you like.

25 MR. FRIEDMAN: I lost the question.

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1 Q. Would you agree, Mr. Gunderman, that the rights that CSL

2 has under the master lease would effectively enable CSL to put

3 the transferor subsidiaries out of business if the rent

4 payments were not made?

5 A. I'm not an attorney and I did not perform that analysis.

6 Q. As a practical matter, is it your understanding that the

7 trans -- is it your understanding that, unless the rent

8 payments are made, the transferor subsidiaries will be faced

9 with the risk of losing the properties?

10 A. Yes.

11 THE COURT: Can I just go back a couple steps. You

12 testified that, by having Holdings sign the master lease, it

13 resulted in the obligations under the lease being junior to

14 other obligations of the Windstream Companies. Is that right?

15 THE WITNESS: Yes.

16 THE COURT: Could you just explain what you mean by

17 that.

18 THE WITNESS: Yes. My answer there pertains to the

19 fact that all the debt that resides at Windstream is at

20 Windstream Services LLC, and in fact the lease obligations

21 between Windstream Holdings and Uniti is outside of the

22 restricted debt group, and in my judgment that makes the

23 structure of the lease being obligated at Holdings be junior in

24 priority to the -- all the covenants and restrictions that

25 apply to the Windstream Services LLC.

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1 THE COURT: All right. Thank you.

2 BY MR. FRIEDMAN:

3 Q. So, Mr. Gunderman, if I understand your testimony, in terms

4 of the legal rights under the financing documents, when you

5 talk about "junior," you are saying that Windstream's Services

6 and the transferor subsidiaries would have the legal right to

7 use their funds for obligations they have before providing

8 funds to Holdings to pay the rent on the master lease. Is that

9 what you're trying to say by "junior"?

10 A. Yes.

11 Q. And would you agree with me that, if the transferor

12 subsidiaries used their funds for other purposes and did not

13 provide funds to Holdings for the rent payments, then there

14 would be a default under the master lease?

15 A. I haven't reviewed that before my testimony today, but my

16 recollection is, that would be the case.

17 Q. And in the case of that default, CSL would have the right

18 to exercise whatever rights the master lease provides for such

19 defaults. Correct?

20 A. Correct.

21 MR. FRIEDMAN: If we could, Joe, we could take down

22 that page.

23 Q. I'm going to move to a different subject. You say,

24 Mr. Gunderman, later in your direct-testimony affidavit, that

25 on November 6, 2017, "we instructed U.S. Bank as trustee to

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1 authenticate and issue the new August 2023 notes." Right? Do

2 you see -- do you need to see that, or do you recall that's

3 your direct testimony?

4 A. May I look at the affidavit?

5 Q. Yes, of course?

6 THE COURT: What paragraph are you reading?

7 MR. FRIEDMAN: It's paragraph 111 in the affidavit.

8 Could we bring that up, Joe, please. It's

9 Mr. Gunderman's direct affidavit.

10 Q. OK. Are you referring to paragraph 111, Mr. Gunderman? I

11 won't read it again. I think I pretty much read it. I'll give

12 you a moment to look at it.

13 THE COURT: The realtime feed says "August 2022," but

14 just for the record it is "August 2023."

15 MR. FRIEDMAN: Right. Thank you, your Honor.

16 Q. So, Mr. Gunderman, is it correct that on November 6, 2017,

17 U.S. Bank, as trustee, was instructed to issue the new August

18 2023 notes?

19 A. Yes.

20 Q. And when you say "we instructed U.S. Bank," who is the

21 "we," please?

22 A. Windstream, in our transaction terms.

23 Q. And when you say "Windstream," do you mean Holdings,

24 Services, all the companies?

25 A. The party to the transactions would be Windstream Services

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1 LLC and Windstream Finance Corp.

2 Q. So those are the entities you would say instructed U.S.

3 Bank as trustee to authenticate and issue the new notes,

4 correct?

5 A. That's my recollection.

6 Q. And the next sentence of your direct testimony says, "U.S.

7 Bank complied with our instructions." I'll pause that. Do you

8 see that?

9 A. Yes.

10 Q. Is that accurate, that is, U.S. Bank did comply with the

11 instructions provided by the two Windstream Companies you

12 mentioned?

13 A. Yes.

14 Q. And were you involved in giving the instruction to U.S.

15 Bank?

16 A. No.

17 Q. Did you know the instruction was being provided?

18 A. Yes.

19 Q. And how did you know?

20 A. I consulted with your general counsel and our transaction

21 attorneys.

22 Q. And was it your understanding that Windstream Services had

23 the right to issue such an instruction to U.S. Bank?

24 A. Yes.

25 Q. And was it your understanding that U.S. Bank had an

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1 obligation to comply with that instruction?

2 A. Yes.

3 MR. FRIEDMAN: We can take that down, Joe, please.

4 Q. You refer in paragraph 113 of your affidavit to proposed

5 waivers and amendments.

6 MR. FRIEDMAN: Can we bring up paragraph 113, please.

7 Q. You say that Services and U.S. Bank executed the third

8 supplemental indenture? Is that understanding of mine correct?

9 A. Yes.

10 Q. And you say that the third supplemental indenture gave

11 effect to the proposed waivers and amendments. So what do you

12 mean by "the proposed waivers and amendments"?

13 A. My recollection was that these are the terms that were

14 provided as part of the second exchange process.

15 Q. And you would agree with me -- and it's a question for

16 you -- that, in executing the indenture, Services and the

17 trustee agreed that the validity of the indenture was an issue

18 to be determined by the Court in this lawsuit; is that correct?

19 MRS. KARIS: Objection, your Honor. Legal conclusion.

20 It's an issue for the Court.

21 MR. FRIEDMAN: Well, I think I'm asking whether he

22 understood that --

23 THE COURT: Overruled.

24 A. Could you ask your question again, please.

25 Q. Yes. You understood that, in executing the indenture,

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1 Services and the trustee agreed that the validity of the

2 indenture was an issue to be determined by the Court in this

3 lawsuit, correct?

4 A. That's not my recollection.

5 MR. FRIEDMAN: I apologize, your Honor. One moment.

6 Q. While we're bringing it up, Mr. Gunderman -- oh, here it

7 is.

8 Do you recall, Mr. Gunderman, who at Windstream

9 Services signed the third supplemental indenture?

10 A. I don't recall as I sit here today. Sometimes I signed

11 them. Sometimes other executives signed them.

12 Q. OK. Well, let's go one step at a time. We have, this one

13 has been marked as WIN116, third supplemental indenture. It's

14 a trial exhibit by Windstream Services. Do you recognize this

15 as the third supplemental indenture that was executed November

16 6, 2017?

17 A. Yes.

18 MR. FRIEDMAN: And let's, please, go, Joe, to the

19 signature page.

20 Q. Is that your signature, Mr. Gunderman, first on behalf of

21 the guarantors?

22 A. Yes.

23 MR. FRIEDMAN: And I think go to the prior page if you

24 would, Joe, please.

25 Q. And that's your signature on behalf of the Windstream

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1 Companies?

2 A. Yes.

3 Q. And do you recall that there is a provision in this

4 indenture saying, "To the extent the requisite consents to any

5 amendment or waiver are determined by court order to have not

6 been validly obtained in accordance with the indenture or

7 applicable law, such amendment or waiver shall not be deemed to

8 have occurred"?

9 A. I don't recall that as I sit here today.

10 MR. FRIEDMAN: Let me just put it up and see if you

11 can refresh your recollection.

12 THE COURT: Mr. Friedman, if the point is to establish

13 that it's in the document, the document speaks for itself. If

14 there's a larger point that you want to get to with

15 Mr. Gunderman, I'll allow it, but --

16 MR. FRIEDMAN: Well, let's just highlight the

17 language.

18 This will be quick, your Honor.

19 THE COURT: All right.

20 MR. FRIEDMAN: And I won't read it again.

21 Q. Do you see what's highlighted on the screen in front of

22 you, Mr. Gunderman?

23 A. Yes.

24 Q. Does that refresh your recollection that such provision was

25 contained in the indenture that you just signed?

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1 A. It is in fact an indenture, a continuing indenture.

2 Q. I'm just asking if you recall this being the indenture when

3 the indenture was agreed to?

4 A. I don't recall it sitting here today reviewing it.

5 Q. And would you agree with me that this is a nonstandard

6 indenture provision?

7 A. I don't know. I don't have a recollection that it's

8 nonstandard.

9 MR. FRIEDMAN: I have no further questions.

10 Thank you, Mr. Gunderman.

11 THE COURT: All right. Cross-examination by Aurelius

12 counsel? Is that what we're doing now or do you want to do

13 redirect separately?

14 MR. ROBBINS: My understanding was the parties have

15 agreed that redirect would come next.

16 THE COURT: All right. Very good. While we're

17 waiting for Mrs. Karis, let me just ask, in paragraph 21 of

18 your affidavit you describe some of the other reasons, I think,

19 as you put it, for having Holdings sign the master lease. Was

20 one of the reasons to have Holdings sign the master lease to

21 avoid a default on the -- or a breach of the indenture

22 agreement?

23 THE WITNESS: We certainly felt like the maximum

24 flexibility was maintained by having it be at Holdings, and,

25 you know, avoidance of default was not what we were

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1 contemplating at that time.

2 THE COURT: All right. But my question is, was one of

3 the considerations given, was there discussion regarding the

4 need to have Holdings be the sole signatory on the master lease

5 in order to avoid a breach of the indenture?

6 THE WITNESS: We certainly had considered, your Honor,

7 the need to have the transaction structure be in accordance

8 with the indenture and all the credit agreement documents, so

9 yes.

10 THE COURT: All right. Thank you.

11 Redirect.

12 MRS. KARIS: Yes, your Honor.

13 May I proceed, your Honor?

14 THE COURT: You may.

15 MRS. KARIS: Thank you.

16 REDIRECT EXAMINATION

17 BY MRS. KARIS:

18 Q. Mr. Gunderman, I want to pick up where counsel just left

19 off with respect to the indenture.

20 MRS. KARIS: If we can bring up the last exhibit,

21 Defendant's Exhibit 1, which is the indenture.

22 Q. You were asked a number of questions regarding the

23 provisions in the indenture. Who did you rely on for purposes

24 of understanding the obligations of the indenture?

25 A. Our general counsel, Kristi Moody, and our transaction

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1 advisors, legal advisors.

2 Q. What was your function with respect to the indenture?

3 A. Ordinarily my responsibility as the CFO and treasurer was

4 to ensure that all material, financial terms, and covenants

5 were within the boundaries of what we considered to be the

6 offer to our investors, and covenants and conditions that we

7 could meet and stay in compliance with all of our material

8 agreements.

9 Q. Now, counsel for the U.S. trustee asked you whether or not

10 there was an obligation, or a provision in the indenture

11 regarding their authenticating the new indenture, third

12 supplemental indenture, and issuing it. Do you recall those

13 questions?

14 A. Yes.

15 Q. All right. I want to look at Section 2.02 of the

16 indenture, titled "Execution and Authentication." First of

17 all, did the U.S. trustee in fact issue and authenticate this

18 third supplemental indenture?

19 A. Yes.

20 Q. And let's look at the language in the indenture at page 29,

21 please, Section 2.02. Prior to this note being authenticated

22 by the U.S. trustee, was there ongoing discussion and dialogue

23 about the authentication of this note?

24 A. Yes.

25 Q. And when I say "ongoing discussion and dialogue," I mean

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1 with the U.S. trustee.

2 A. Yes.

3 Q. And at the end of that discussion and dialogue, what was

4 the trustee's decision with respect to this note?

5 MR. FRIEDMAN: Object, your Honor. Of course, if the

6 question is what was discussed with you and the trustee, I

7 understand that. But a conclusory statement by Mr. Gunderman

8 as to what the trustee decided is -- I object.

9 THE COURT: Isn't it in his direct testimony that the

10 trustee authenticated the third supplemental indenture? And

11 didn't he talk about it?

12 MR. FRIEDMAN: Your Honor, in terms of those legal

13 acts there's no issue. It's actually not the indenture that's

14 authenticated. The notes are authenticated. And in terms of

15 what happened, I agree; it's in the record; there's no dispute.

16 But if Mr. Gunderman is being asked on the witness stand, what

17 did the trustee decide, I have no idea what testimony

18 supposedly is being elicited and I would object to that

19 question.

20 MRS. KARIS: Your Honor, maybe I can rephrase.

21 THE COURT: Why don't we do that. I think there's no

22 dispute that the trustee authenticated the notes, if that's

23 what you're trying to get at. I don't think you need to get at

24 it at all.

25 MRS. KARIS: Very well.

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1 Q. One last question on this matter. With respect to the

2 indenture in the section that we have up here, Section 2.02,

3 the authentication of the notes. So I stand corrected.

4 If we can scroll a little further down, please. The

5 indenture indicates that "additional notes in such amounts as

6 may be specified from time to time without limit so long as

7 issuance is permitted under Article Four of this indenture and

8 applicable law." do you see that?

9 A. Yes.

10 Q. What was your understanding of what the authentication of

11 the notes indicated with respect to the issuance of those

12 notes?

13 MR. FRIEDMAN: Your Honor, I object to the question.

14 The witness has said that he was not involved in these matters,

15 he was involved in the financial matters. If all we're going

16 to hear is what the witness was told by his lawyers, I would

17 object to that question and answer.

18 MRS. KARIS: If I may respond, your Honor.

19 THE COURT: Briefly.

20 MRS. KARIS: Sure. Counsel asked Mr. Gunderman on his

21 cross-examination whether or not the trustees authenticated

22 these notes and what the implications of that were, and whether

23 it was for the Court to resolve any disputes with respect to

24 those notes. So they opened the door to this.

25 THE COURT: I think it's of questionable relevance,

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1 but I'll allow the witness to answer.

2 But, Mr. Gunderman, let me just be clear, you should

3 answer based on your own understanding and not what you were

4 told by someone else. All right?

5 THE WITNESS: Sure.

6 A. Please repeat the question, please.

7 Q. Sure. What was your understanding of what the

8 authentication of the notes indicated with respect to being

9 permitted under Article Four under this indenture and

10 applicable law, as indicated in Section 2.02?

11 A. My understanding was that the transactions that were

12 contemplated in the exchange and consents were allowable, as

13 long as they fit in within the covenants of the indenture,

14 which I believe they did.

15 Q. Let's move on to a different subject. You were asked at

16 the beginning of your testimony some questions regarding your

17 statements to the Kentucky regulators. Do you recall those

18 questions?

19 A. Yes.

20 Q. And you indicated in your affidavit that the testimony that

21 counsel showed you was an oversimplification, when you said

22 that the agreements were administrative ease, it was just for

23 administrative ease, in terms of transacting the lease between

24 the entities. Do you recall that?

25 A. Yes.

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1 Q. Explain why you say it was for administrative ease.

2 A. Well, in my capacity in testifying before the Kentucky

3 commission, I was primarily charged with speaking to the

4 financial benefits and structuring of the transaction. When

5 asked about the obligation of the master lease and who the

6 obligor would be, I did correctly indicate that that would be

7 Windstream Holdings. I also indicated that it would be for

8 administrative ease. And in that answer, I recall

9 oversimplifying at some level the answer and recalling that

10 another reason for having the lease obligor be Windstream

11 Holdings was to avoid the need to have hundreds and thousands

12 of assets and contracts be retitled, under a retained-title

13 concept, which I had learned about as part of the transaction

14 structure. And it was in my judgment that that was a reason

15 for -- one benefit of having the lease at Holdings.

16 Q. You went on to explained to counsel that, as you indicated

17 in your affidavit, that there were other benefits to this

18 agreement. Do you recall that?

19 A. Yes.

20 Q. I want to pull up Exhibit 184, please.

21 THE COURT: If you could clarify when citing an

22 exhibit whether you're citing a WIN exhibit or which category

23 we're in, that would be helpful.

24 MRS. KARIS: Yes. Thank you.

25 (Continued on next page)

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1 MS. KARIS: Windstream Exhibit 184, please.

2 THE COURT: Mr. Gunderman, it is on your screen, if it

3 is easier.

4 THE WITNESS: Yes. Thank you.

5 BY MS. KARIS:

6 Q. Do you have Exhibit 184, which is the Form 8-K?

7 A. Yes.

8 Q. If I can direct your attention now to page 16. Do you

9 recognize --

10 A. Excuse me, 16 is -- yes, thank you.

11 Q. It is on the screen?

12 A. Thank you.

13 Q. OK. Do you recognize this document?

14 A. Yes, I do.

15 Q. Can you tell us what this is?

16 A. This a slide disclosure that we made in and around the time

17 of the transaction communications to highlight the benefits of

18 the transaction that we were announcing.

19 Q. And does this page summarize some of the other benefits

20 that you were indicating in your direct affidavit?

21 A. Yes.

22 Q. The first box there says, "Enables Greater Network

23 Investments." Explain to us briefly what the benefit was that

24 was being identified as enabling greater network investments.

25 A. Well, in the sense that over $4 billion of debt reduction

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1 occurred on behalf of Windstream, that in and of itself caused

2 our cash interest payments to decrease significantly, and it

3 gave us the ability to use some of those increased free cash

4 flows to reinvest back into our business for stability and

5 growth over time. In fact, one of the things that we had

6 designated at the time and have since done extensively is to

7 accelerate our broadband investments, transition to an

8 IP-centric network and delivering enhanced services to our

9 customers.

10 THE COURT: "IP" being?

11 THE WITNESS: A next-generation capacity network for

12 the benefit of our customers.

13 THE COURT: What do you mean by -- what does "IP"

14 stand for?

15 THE WITNESS: It is a designation. I can't remember

16 the exact, you know, connotation of it, but it is basically a

17 next-generation network that we were putting in place which

18 would provide for better benefits for our customers.

19 THE COURT: It is not intellectual property in this

20 context?

21 THE WITNESS: No.

22 THE COURT: That is what it means to lawyers.

23 THE WITNESS: It is not that.

24 MS. KARIS: It has a different meaning.

25 BY MS. KARIS:

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1 Q. The second bullet there indicates "Optimize Capital

2 Structure." Explain to us what the benefit was that was

3 received that resulted in optimizing capital structure?

4 A. Well, as part of the 2015 transaction where we established

5 the new REIT, Windstream received substantial debt reduction in

6 the form of approximately a billion dollars of cash,

7 approximately two-and-a-half billion dollars of debt relief

8 through a debt-for-debt exchange, which lowered Windstream's

9 debt by three-and-a-half billion. And then in addition to

10 that, over time, as we sold a retained equity stake in Uniti,

11 we also generated additional debt reductions of approximately

12 700 million. So the aggregate benefits to Windstream were

13 would reduce itself over $4 billion, which was substantial in

14 comparison to our total debt, and reduce our leverage, as I

15 recall, by about a half a turn of deleveraging.

16 Q. You are the CFO of the company?

17 A. Yes.

18 Q. What was your perception as the CFO, from your perspective,

19 of the benefit that resulted from decreasing your debt by $4

20 billion and improving your leverage?

21 A. It was very significant.

22 Q. Why do you say it was very significant?

23 A. As the CFO of Windstream, I'm aware that both our debt

24 investors and our equity investors are focused on the amount of

25 debt that we have outstanding, the amount of cash flow that we

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1 dedicate to our debt obligations, and our abilities to manage

2 our debt maturities, and so any significant reduction that we

3 would have made to the amount of debt outstanding in my view

4 would and did improve the perception from our investors about

5 our abilities to meet our financial obligations and to invest

6 in our business.

7 In addition to that, within our credit agreements, one

8 of our main maintenance covenants that we had to abide by is a

9 4.5 times leverage maintenance ratio, and a half-of-turn

10 deleveraging benefit towards that maintenance ratio was very

11 significant and give us significant headroom and cushion and

12 abilities to continue to more comfortably manage to that

13 covenant.

14 THE COURT: And to be clear, was the debt you are

15 describing, is that at the Holdings' level or the Services'

16 level, or at what level?

17 THE WITNESS: At the Services' level.

18 THE COURT: So what's the benefit to having Holdings

19 sign the Master Lease? How does that reduce the debt profile

20 of Services?

21 THE WITNESS: Well, Services is where the debt relief

22 was held. The other benefits, your Honor, that I would see us

23 having, you know, Holdings as being the obligor was simply,

24 again, given that Holdings was outside the restricted debt

25 group of Windstream Services LLC, the payments there are

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1 restricted in priority. And I further say that any significant

2 benefits that, you know, were to be had at Services or Holdings

3 that influenced the cash flow abilities or the refinancing

4 abilities of Holdings or Services benefited the entire family

5 of companies.

6 THE COURT: Go ahead.

7 BY MS. KARIS:

8 Q. The next bullet references "Aligns Strategic Objectives."

9 In what way did this transaction make sense because it aligns

10 strategic objectives?

11 A. Yes. I recall the strategic objectives that we were

12 focused on were to position two companies in two different

13 investment-focused ways. You know, Windstream was more free

14 cash flow and a better ability to reinvest back into its

15 business for the benefits of its customers and ultimately drive

16 stability and cash flows and growth over time.

17 With the investment story, that would be made more

18 achievable by the reduction of debt on the operating company.

19 On the other hand, the real estate investment trust

20 that was formed was to be set up as a yield-focused real estate

21 investment trust which provides a steady cash flow with

22 significant dividends that would provide benefits to

23 shareholders.

24 Q. And then lastly, it says, "Unlocks Shareholder Value." In

25 what way did this transaction make sense because it unlocked

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1 shareholder value?

2 A. Well, again, all these are related, but certainly to the

3 extent that we could achieve both at Windstream and at the REIT

4 the strategic objectives, the ability to stabilize and grow

5 cash flows over time could in fact drive better equity and debt

6 holder value, and the same would be true for the REITs.

7 MS. KARIS: Just one minute, your Honor.

8 (Pause)

9 Your Honor, I have no further questions for Mr.

10 Gunderman at this time.

11 THE COURT: All right. Recross.

12 RECROSS-EXAMINATION

13 BY MR. FRIEDMAN:

14 Q. Mr. Gunderman, I am going to show you Section 2.10 of the

15 Third Supplemental indenture that you signed. Do you see

16 Section 2.10?

17 THE COURT: Could you make a record of what exhibit we

18 are on?

19 MR. FRIEDMAN: Yes. This is WIN 116, Section 2.10.

20 Q. And this contains a Trustee disclaimer, and you see that

21 the last sentence says: "The Trustee makes no recommendations

22 as to the statements made in the Consent Solicitation Statement

23 or the validity or sufficiency of the Consent Solicitation, the

24 Consent Solicitation Statement, or this Supplemental Indenture

25 or the consequences of any amendment provided herein."

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1 Do you recall that being in the third supplemental

2 Indenture that you signed?

3 A. I didn't recall it as of -- until you just read it to me,

4 but I do recall certainly reading the Indenture.

5 Q. Now, you were testifying, in response to Ms. Karis'

6 questions, about why you used the phrase "administrative ease"

7 in addition to what you had previously said. You gave another

8 reason that had something to do with having assets -- avoiding

9 the need to have assets retitled. Do you recall that?

10 A. Yes.

11 Q. So, let me ask you, in the transaction that occurred

12 April 24, 2015, assets were being transferred from the

13 transferor subsidiaries to CSL, correct?

14 A. Yes.

15 Q. The fair market value of those assets was about

16 $7.5 billion, correct?

17 A. Yes.

18 Q. And those assets were the real estate and other

19 telecommunications assets necessary for the transferor

20 subsidiaries to operate their business, correct?

21 A. A portion of them, yes.

22 Q. And with respect to that seven-and-a-half billion dollars

23 in assets being transferred, there the transfer was of all of

24 the right, title, and interest that the transferor subsidiaries

25 had in that seven-and-a-half billion dollars of assets,

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1 correct?

2 A. That's my general recollection, but the attorneys were

3 focused on that primarily.

4 Q. And then, in addition to that seven-and-a-half billion

5 dollars of assets, there were certain assets, such as

6 easements, where the transferor subsidiaries were retaining

7 legal title; do you recall that?

8 A. Generally I do.

9 Q. And those easements and things like that, they were no part

10 of the seven-and-a-half billion dollars fair market value of

11 assets, correct?

12 A. I don't recall if they were or weren't.

13 Q. The seven and a half -- sorry. The easements and other

14 assets or rights where the subsidiaries were retaining legal

15 title were a tiny sliver of what was being transferred, is that

16 correct?

17 A. I don't know.

18 Q. OK. And do you understand that with respect to the assets

19 being transferred, prior to the transfer, the transferor

20 subsidiaries owned the assets and had title to the assets,

21 correct?

22 A. That's my general recollection.

23 Q. And putting aside this category of easements and the like,

24 after the transfer, CSL owned the assets and had title to the

25 assets, correct?

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1 A. I'm not an attorney but generally that's my recollection.

2 Q. And then there is this category of easements and the like

3 where the transferor subsidiaries are retaining legal title but

4 transferring all of their beneficial interests to CSL, correct?

5 A. I can't answer that. I'm not an attorney. I'm not

6 prepared to or capable of answering that question.

7 Q. Well, you did say, in response to questions from Ms. Karis,

8 that you learned about this issue of assets being retitled or

9 not as part of the structure, correct?

10 A. Correct.

11 Q. So in terms of what you learned, did you understand that

12 with respect to the assets being transferred to CSL, there were

13 these easements and the like where the transferor subsidiaries

14 would retain legal title but transfer to CSL all of their

15 interest, beneficial interest, in the easements and the like?

16 Did you understand that?

17 A. I don't recall the details of that, no.

18 Q. OK. Now, you said, in responding to questions from

19 Ms. Karis, that one of the reasons for having Holdings sign the

20 Master Lease was to avoid the need to have assets retitled. Do

21 you recall that?

22 A. I do.

23 Q. So am I correct that with respect to the transaction and

24 the transfer of assets by the transferor subsidiaries, there

25 were no assets being transferred to Holdings, is that right?

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1 A. Again, I wasn't responsible for the legal steps and

2 perfection of the legal title. You would have to ask our

3 attorneys about that.

4 Q. But you do understand the assets that were owned by the

5 transferor subsidiaries were transferred to CSL, correct?

6 A. Yes.

7 MR. FRIEDMAN: Can we bring up, Joe, please, PX21 at

8 page 26? Page 26, with the highlighting. Did I give the wrong

9 exhibit? Yes. There we go.

10 Q. So I put back up on the screen, Mr. Gunderman, the question

11 you were asked in the Kentucky proceedings when you gave the

12 answer "Administrative ease," and you were explaining, in

13 response to Ms. Karis' questions, that you were oversimplifying

14 a little. Did I understand that correctly?

15 A. Yes.

16 Q. And your testimony is that when you were asked this

17 question about whether there will be an agreement between the

18 Kentucky transferor subs and CSL, you were thinking about this

19 issue of retitling assets. Is that your testimony?

20 A. Yes.

21 Q. Would you agree with me that retitling of assets has

22 nothing to do with the question of whether there is an

23 agreement between the Kentucky transferor subs and CSL?

24 A. Could you ask your question again, please?

25 Q. Yes. The question was would you agree that retitling of

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1 assets has nothing to do with the question of whether there is

2 an agreement between the Kentucky transferor subs and CSL?

3 A. I wouldn't characterize it as nothing to do, but I

4 certainly believe that I oversimplified my answer as it related

5 to that portion of the answer.

6 Q. Now, you also said, in response to questions from

7 Ms. Karis, that one of the benefits of this April 24, 2015

8 transaction was reducing interest expense and increasing cash

9 flow. Did I understand that correctly?

10 A. Yes.

11 Q. So let me show you PX83. Let's just bring up the front

12 page first, Joe.

13 This is the Windstream Services, LLC Form 10-K for the

14 year ending 12/31/16. Do you see that?

15 A. Yes.

16 Q. And let me move to page F-13 in this document. If you

17 could bring that up, Joe, please. And highlight the very

18 bottom line that says, "Total Interest Expense."

19 So I'm showing you part of the 10-K that was filed

20 with the SEC. And do you see that the line that has been

21 highlighted shows total interest expense for the years 2016,

22 2015 and 2014. Let me ask you this. For the year 2014, we're

23 talking about a full year before this transaction had occurred,

24 correct?

25 A. Yes.

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1 Q. And the transaction occurred in April of 2015, so I'll put

2 aside 2015 for the time being.

3 2016 is the first full year after the transaction,

4 correct?

5 A. Yes.

6 Q. And would you agree with me that in 2016, compared to 2014,

7 the interest expense of the company has actually increased by

8 $300 million?

9 A. Yes. The book interest expense increased.

10 Q. When you say "book interest expense," this is the interest

11 expense shown in the audited financials filed with the SEC,

12 correct?

13 A. Correct.

14 Q. OK. Now, you talked about debt reduction in connection

15 with the April 24, 2015 transaction, correct?

16 A. Yes.

17 Q. I want to understand the picture and what exactly is meant

18 by debt reduction. One step in the transaction was the

19 transferor subsidiaries transferring away seven-and-a-half

20 billion dollars of assets, correct?

21 A. No. That's fair market value.

22 Q. Fair market value, seven-and-a-half billion, correct?

23 A. Yes.

24 Q. Those assets were transferred to CSL, and on April 24,

25 2015, 80 percent of CSL stock was spun off to the public

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1 shareholders?

2 A. The existing Windstream shareholders who owned the company.

3 Q. Right. So the shareholders received 80 percent of CS&L,

4 correct?

5 A. Yes.

6 Q. And a short time later the remaining 20 percent was

7 disposed of, correct?

8 A. Sold for additional debt reduction for Windstream.

9 Q. So within a year or so of the April 2015 transaction, all

10 of CSL was owned by the public shareholders?

11 A. Before and after the transaction, shareholders owned both

12 entities is how I view it.

13 Q. Well, let's be clear. Before the transaction, CSL was a

14 wholly-owned subsidiary of Windstream Services?

15 A. Correct.

16 Q. So before the transaction, whatever assets CSL had were

17 available to Windstream Services for satisfying obligations of

18 Windstream Services, correct?

19 A. Correct.

20 Q. After the spin-off of CSL shares to the public

21 shareholders, CSL was an independent company and the assets of

22 CSL were no longer available to Windstream Services or any of

23 the Windstream companies to satisfy their obligations, correct?

24 A. No.

25 THE COURT: Meaning that is not correct?

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1 THE WITNESS: Meaning we entered into a long-term

2 exclusive use, Windstream did, to use the assets for the

3 benefits of our operating companies that would benefit both our

4 debt holders and our shareholders.

5 BY MR. FRIEDMAN:

6 Q. OK. So, let's follow up on that.

7 Seven-and-a-half billion dollars of assets are owned

8 by CSL, a public company, correct?

9 A. Correct.

10 Q. And those are assets that had been owned by the transferor

11 subsidiaries, correct?

12 A. Correct.

13 Q. And you were saying, in response to Ms. Karis' questions,

14 that in connection with that transfer of assets and other

15 aspects of the transaction, there was debt reduction, correct?

16 A. Correct.

17 Q. The amount of that debt reduction was approximately

18 three-and-a-half billion dollars, correct?

19 A. Over four billion in total.

20 Q. OK. I'll use your number.

21 A. Thank you.

22 Q. But the records will show what they show.

23 Four billion in debt reduction, that's one aspect,

24 correct?

25 A. Correct.

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1 Q. Seven-and-a-half billion dollars of assets transferred

2 away, correct? That's another aspect?

3 A. Correct.

4 Q. And then you mentioned that there was a lease of those

5 assets making them available for use by the transferor

6 subsidiaries in their business, correct?

7 A. Windstream Holdings and the benefits of all its

8 subsidiaries, yes.

9 Q. Windstream Holdings signed the lease for the benefit of the

10 subsidiaries, correct?

11 A. They were express beneficiaries of the lease, yes.

12 Q. Because the transferor subsidiaries are the ones using

13 those assets that are being leased, correct?

14 A. Yes.

15 Q. And in order for the transferor subsidiaries to get the

16 benefit of using the assets, there is a rent obligation that is

17 set forth in the Master Lease, approximately $650 million a

18 year to be paid to CSL, correct?

19 A. Yes.

20 Q. So when we talk about debt reduction and interest expense

21 and what that does for the cash flow, don't we have to factor

22 in that part of the cash flow is, starting with the signing of

23 the Master Lease, $650 million --

24 A. Yes.

25 Q. -- has to go out the door to pay the rent, correct?

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1 A. Yes.

2 Q. Now, Ms. Karis was showing you some presentations about

3 benefits of the transaction. Let me -- the presentation that

4 Ms. Karis showed you when she was questioning you, do you know

5 who that was a presentation to, Mr. Gunderman?

6 A. I'd have to referred the 8-K, but, you know, we did various

7 presentations on behalf of all of our investors, both debt and

8 equity, to, you know, educate, you know, all of our

9 constituents on the benefits and the impacts of the

10 transaction.

11 Q. So let me show you -- and, by the way, in making those

12 representations, were there also presentations to rating

13 agencies?

14 A. Yes.

15 Q. So let me show you PX58, which is a presentation to the

16 rating agencies. This is the first page of PX58.

17 Am I right? Is this the first page? Yes.

18 Do you recognize this from the cover page?

19 A. I would have been the treasurer at this time, so I'm sure I

20 must have been -- if this was a rating agency presentation

21 given, I'm sure I was part of it.

22 Q. OK. But let me move into the document to the page that is

23 WIN 20782, please. Can you highlight, Joe, please, "Implicit

24 Priority."

25 So, in thinking about the pros and cons of the

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1 transaction, one of the things that Windstream was explaining

2 to potential investors and potential bondholders in CSL was

3 that the continued viability of WIN requires timely payment of

4 the Master Lease before any other payments except requisite

5 operating expenses, correct?

6 A. Yes.

7 Q. And this was intended to assure the potential bondholders

8 of CSL that there was at Windstream an implicit priority for

9 paying the rent, correct?

10 A. This presentation was to the rating agencies.

11 Q. And you were showing the rating agencies because the rating

12 agencies rate the bonds and that has an impact on how the

13 bondholders look at the investment, correct?

14 A. Yes, correct.

15 Q. And you wanted the rating agencies and the potential

16 bondholders of CSL to understand that the continued viability

17 of WIN requires timely payment of the Master Lease before any

18 other payments except requisite operating expenses, correct?

19 A. That was in the presentation, yes.

20 Q. And that was what you wanted the prospective bondholders to

21 understand, correct?

22 A. Correct.

23 Q. And this was an accurate representation to the rating

24 agencies, correct?

25 A. Yes.

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1 MR. FRIEDMAN: No further questions.

2 THE COURT: If there is brief reredirect, I would

3 allow it.

4 MS. KARIS: Very, very brief, your Honor.

5 THE COURT: All right. Reredirect.

6 FURTHER REDIRECT EXAMINATION

7 BY MS. KARIS:

8 Q. Mr. Gunderman, you were asked whether the company's overall

9 debt decreased in leverage ratio improved when the 650 million

10 rent payment was accounted for. Do you recall that?

11 MR. FRIEDMAN: Objection, your Honor. There were no

12 questions about leverage ratio.

13 THE COURT: Sustained.

14 Q. Let's go back to whether the company's debt profile

15 improved after the obligation for the rent payment.

16 MR. FRIEDMAN: Your Honor, I'm going to object only

17 because my cross in this area did not in any way go into new

18 matter. It was simply cross following up on the questions that

19 Ms. Karis had asked.

20 THE COURT: All right. But I think you did raise

21 questions about whether it actually improved the debt profile,

22 so I will allow it. Go ahead.

23 MS. KARIS: Thank you.

24 If we can pull up PX6, please. And go to the next

25 page.

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1 Q. Mr. Gunderman, do you recognize this, which is titled,

2 "Application of Windstream Subsidiaries for approval, to the

3 extent required," submitted along with a certificate for

4 approval to the Alabama Public Service Commission?

5 A. Yes.

6 Q. And attached to this document --

7 THE COURT: Ms. Karis, could I interrupt?

8 MS. KARIS: Certainly.

9 THE COURT: I'm sure this is because Ms. Smallman is

10 not here. It is not on my screen but I take it it is on

11 everyone else's screen?

12 MS. KARIS: I do see it on counsel's screen here.

13 THE COURT: All right. So carry on. I am the least

14 important here. So, go ahead.

15 MS. KARIS: I don't know about that. In fact, I would

16 respectfully disagree.

17 THE COURT: Looking for flattery. I will pull it up

18 on the computer.

19 MS. KARIS: I am happy to proceed.

20 THE COURT: Plaintiff's Exhibit 6 we are in?

21 MS. KARIS: Yes.

22 THE COURT: All right. I have it. Go ahead.

23 MS. KARIS: Very well.

24 BY MS. KARIS:

25 Q. So page 1 indicates that it is submitted to the Alabama

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1 Public Service Commission, and I'd like to focus your attention

2 on the page ending in Bates number 270, please, which is

3 Exhibit E to the attachment.

4 Mr. Gunderman, since you were responsible for the

5 financials in connection with these submissions, do you

6 recognize this particular exhibit?

7 A. Yes.

8 Q. Can you tell us what this shows with respect to the

9 company's debt profile accounting for the rent payments that

10 need to be made?

11 MR. FRIEDMAN: Your Honor, I have an objection. This

12 is Windstream Holdings for the year ended December 31, 2013.

13 It has nothing to do with what I was asking the witness about.

14 MS. KARIS: Your Honor, if I may direct counsel's

15 attention to the center column, which indicates pro forma

16 adjustments?

17 THE COURT: All right. I will allow the witness to

18 answer.

19 MS. KARIS: Thank you.

20 THE COURT: And I will consider it for what it is

21 worth. Go ahead.

22 BY MS. KARIS:

23 Q. Mr. Gunderman, just to reorient ourselves here, this says

24 it is December 31, 2013. Do you see that?

25 A. Yes, I do.

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1 Q. And the first column reports what?

2 A. The first column, other than the words and descriptions, is

3 an as-reported reference of my understanding the fiscal year

4 ended December 31, 2013 --

5 Q. Let me stop you there.

6 There is a middle column that's titled "Pro Forma

7 Adjustments." What is that column indicating?

8 First of all, what does that mean, "pro forma

9 adjustments"?

10 A. Pro forma adjustments in this analysis is an indication of

11 the impacts on the financial condition of Windstream as a

12 result of the 2015 transaction that was anticipated.

13 Q. And the last column there says "Pro Forma." What is that

14 column intended to represent?

15 A. It is intended to represent the financial outcome and

16 condition of Windstream after taking into consideration the

17 impacts of the 2015 transaction.

18 Q. OK. The second line down there says, "Adjusted OIBDA." Do

19 you see that?

20 A. Yes, I do.

21 Q. What does OIBDA stand for?

22 A. Adjusted OIBDA is operating income before appreciation and

23 amortization, which is a commonly filed measure of operating

24 cash flow, for lack of a better word, or some reference to

25 operating cash flow from the business revenues less operating

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1 expenses.

2 Q. So another way of saying "operating income"?

3 A. Generally. Not exactly but very close.

4 Q. Fair enough.

5 What is the next line that's reported on this?

6 A. The next line is "Rent Payment."

7 Q. What is the 650 that's in the pro forma adjustment intended

8 to represent on this page?

9 A. The annual Master Lease obligation payment.

10 Q. And so going down that, then, to the "debt leverage ratio,"

11 what is debt leverage ratio intended to represent?

12 A. Debt leverage ratio is intended to be a measure of our debt

13 outstanding under our, you know, major debt agreements as of,

14 you know, over our cash flows. That is our maintenance

15 covenant of leverage ratio of four-and-a-half times is a

16 calculation that's illustrated -- the components of that are

17 illustrated on this page.

18 Q. There is a line immediately under that that says "Long-term

19 debt, including current maturities." And it goes from, as

20 reported, 8.7, and then there is a pro forma adjustment, a

21 negative 3.169. Tell us what that is intended to reflect.

22 A. At the time we prepared this, that was our estimate of the

23 debt reduction amounts that would be realized for Windstream as

24 part of the 2015 transaction, and that number subsequently

25 increased.

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1 Q. Was that in fact realized as a result of this transaction?

2 A. Yes.

3 Q. And then to close this off, at the very bottom, you

4 indicated that the leverage ratio improved as a result of the

5 debt reduction. Is that represented on this document?

6 A. Yes, it is.

7 Q. And what happened to the leverage ratio as a result of this

8 transaction?

9 A. It went down from 3.79 times to 3.41 times leverage.

10 Q. And so was the 2015 transaction a deleveraging transaction?

11 A. Yes.

12 Q. And did it lower the debt more than it lowered the revenue

13 and earnings accounting for the 650 million annual rent

14 payment?

15 A. Yes.

16 MS. KARIS: I have no further questions. Thank you.

17 THE COURT: All right. If you would like brief

18 rererecross, I think we are at, you may.

19 FURTHER RECROSS-EXAMINATION

20 BY MR. FRIEDMAN:

21 Q. Mr. Gunderman, in looking at that document -- could we

22 bring that slide up again? I don't need it. Never mind.

23 In looking at the document that Ms. Karis was asking

24 you about, you were saying that the pro forma column

25 illustrates the debt reduction, is that right?

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1 A. Yes.

2 Q. And with the debt reduction, there is an improvement in the

3 leverage ratio; that's what you were saying, correct?

4 A. Yes.

5 Q. Now, you would agree with me that when the Master Lease was

6 signed, the rent obligations under that Master Lease had a

7 present value of about $5.1 billion, correct?

8 A. Yes.

9 Q. In calculating the debt and the leverage ratio, am I

10 correct that none of that $5.1 billion is in the calculation?

11 A. Correct.

12 MR. FRIEDMAN: No further questions.

13 THE COURT: All right. I think we are going to let --

14 well, you are not actually free to go. We are going to end

15 that portion here.

16 I take it we are now going to transition to the sort

17 of second trial within the trial and conduct cross-examination

18 by Aurelius; is that the plan?

19 MR. GODFREY: I would think that is the plan, your

20 Honor. We would move under Rule 52. I understand the Court,

21 this is a bench trial, so you are probably not going to have

22 argument, but I am happy to have us go as long and deep on a

23 Rule 52 motion now as you want but I suspect you have other

24 plans. So I just wanted to make the point that continue to

25 believe that U.S. Bank has failed to meet its burden of proof

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1 and that in fact their loan indentures should be enforced.

2 THE COURT: All right. Thank you. The motion is

3 made. I will take it under advisements and we'll proceed.

4 Are you guys swapping out the tables?

5 MR. FRIEDMAN: Yes.

6 THE COURT: What is the plan?

7 All right. So why don't you do that as quickly and

8 quietly as you can. I will not count this against anyone's

9 time and then we'll carry on.

10 Mr. Gunderman, you stay there.

11 MR. GODFREY: Your Honor, I will hesitate and I hate

12 to ask, but what is the time allocation at least among the

13 parties that so I can figure out how much time I am allotted

14 for certain cross-examination?

15 THE COURT: I will give you that in one second.

16 MR. GODFREY: Thank you.

17 MS. KARIS: Your Honor --

18 (Pause)

19 MS. KARIS: I was just going to ask if I can approach

20 to get those binders.

21 THE COURT: Please.

22 All right. Mr. Robbins.

23 MR. ROBBINS: Thank you, your Honor.

24 CROSS-EXAMINATION

25 BY MR. ROBBINS:

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1 Q. Good morning, Mr. Gunderman.

2 A. Good morning.

3 THE COURT: Hang on one second.

4 First, Mr. Godfrey had asked for a tally of the

5 running time. Trustee used four hours and 50 minutes of its

6 time. I think -- I take it that will be all it uses, so I

7 think that's sort of a nonissue at this point. Services has

8 used 2 hours and 24 minutes of its time, and Aurelius has not

9 used anything yet.

10 Could you just tell me who is at the front counsel

11 table now?

12 MR. ROBBINS: Yes, your Honor.

13 To my immediate left is of Wendy Liu from my office.

14 To her immediate left is Jeffrey Kane, one of my colleagues.

15 Joe is handling the video. And my partner William Trunk on the

16 far left. And that completes the lineup as of now.

17 THE COURT: All right. But Joe doesn't get a last

18 name?

19 MR. ROBBINS: Ah.

20 (Pause)

21 MR. ROBBINS: Joe Simons. I'm sorry.

22 THE COURT: No worries.

23 MR. ROBBINS: I thought perhaps that was already on

24 the record.

25 THE COURT: I don't think so but thank you.

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1 Mr. Simons, a pleasure.

2 All right. Mr. Robbins, you may proceed.

3 BY MR. ROBBINS:

4 Q. Mr. Gunderman, I think I've put in front of you a binder

5 that contains materials I intend to use with your

6 cross-examination. Do you have that handy, sir?

7 A. Yes.

8 Q. All right. I want to start with just a couple of follow-up

9 questions about your affidavit.

10 You will notice, I think you will see that's in Tab 1

11 of your binder. Do you have that handy, sir?

12 A. Yes.

13 Q. I believe Ms. Karis asked you about whether you had any

14 changes to the affidavit that you wanted to call to the Court's

15 attention and your answer was no. Is that right?

16 A. Yes.

17 Q. May I just ask, sir, how recently have you read the

18 affidavit to ensure that you in fact have no changes you wish

19 to make?

20 A. This morning.

21 Q. And before that, how recently had you read it?

22 A. Last night.

23 Q. And in any of the review that you've done in preparation

24 for your testimony, have you not only read the text but

25 compared the text to the exhibits that are referred to in your

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1 declaration?

2 A. Before I attested to the testimony, I did do that, yes.

3 Q. And you were satisfied that the record that is made in the

4 affidavit is true and accurate?

5 A. Yes.

6 Q. No changes you wish to make in the cited exhibits in any

7 way, sir?

8 A. No.

9 Q. All right. And you knew, when you were doing that review,

10 that there was a pretty good chance you would be questioned

11 about that affidavit during the course of your testimony today,

12 correct?

13 A. Yes.

14 Q. And you understood that this was a document that was going

15 to be offered in evidence by your counsel for purposes of

16 informing the Court about the materials contained in that

17 affidavit, correct?

18 A. Yes.

19 Q. And as you sit here today, you would like the Court to rely

20 on the information contained in your affidavit, correct?

21 A. Yes.

22 Q. All right. Now, one of the -- let's go back to sort of

23 your line of work as CFO. You were CFO at the time not only of

24 the sale and leaseback -- I'm sorry, you were the CFO at the

25 time of the consent and exchange about which I'm going to be

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1 questioning you today, correct?

2 A. Yes.

3 Q. And am I right, sir, that in your capacity as CFO, you work

4 with bond indentures pretty regularly?

5 A. Yes.

6 Q. And you understand, do you not, Mr. Gunderman, that an

7 indenture prescribes the rights and obligations of the

8 contracting parties to that indenture, correct?

9 A. Yes.

10 Q. It's a contract, a contract specific to the world of bond

11 and raising capital in the private and public markets, correct?

12 A. Yes.

13 Q. And you likewise understand, do you not, that potential

14 lenders, that is, people who are going to buy the company's

15 bonds, they rely on the terms of those indentures in deciding

16 whether to purchase the company's debt, correct?

17 A. Yes.

18 Q. And you expect them to rely on those terms and conditions,

19 correct?

20 A. Yes.

21 Q. And the best place for us to look to ascertain the

22 respective rights and obligations of the parties is the actual

23 text of the Indenture, right?

24 A. Yes.

25 MS. KARIS: Objection, your Honor.

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1 THE COURT: Overruled.

2 Q. And because, sir --

3 THE COURT: Overruled.

4 Q. And because, sir, because the rights and obligations are

5 set out in indenture, in the indenture, that means that every

6 now and then something that a company really wants to do

7 because they think it's in the best interest of the company may

8 turn out to be prohibited by the indenture, isn't that right?

9 A. I don't -- I don't know. Do you have a specific question?

10 Q. I'm just asking you whether if it turns out that a

11 particular transaction is forbidden by an indenture, the mere

12 fact that the company thinks it would be a good idea, as you

13 understand the function of an indenture, that doesn't allow the

14 company to do it if it is prohibited by the indenture, right or

15 wrong?

16 A. Correct, yes.

17 Q. All right. So let's talk about the Indenture in this case.

18 I believe you answered Ms. Karis in one of the

19 examinations that you concluded that the new notes -- I believe

20 these were your words -- fit within the covenants, correct?

21 A. Yes.

22 Q. And what you meant by that, Mr. Gunderman, is that in

23 deciding whether to go forward with the transaction, you looked

24 through the Indenture, you read the relevant provisions, and

25 you decided this meets all the tests, right?

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1 A. Yes.

2 Q. And one of the covenants, one of the provisions of the

3 Indenture that you looked at specifically was 409 -- 4.09 of

4 the Indenture, correct?

5 A. Can you reference the section, please?

6 Q. I would be glad to do it. Let's put it on the board, Joe,

7 shall we? 4.09.

8 (Pause)

9 All right. Thanks, Joe.

10 I am going to ask you a few questions about it, but

11 let's just start by asking you, sir, do you recognize 4.09 as

12 one of the covenants you were satisfied had been met in the

13 consent exchange transaction?

14 A. Yes.

15 Q. All right. And I understand you are not a lawyer, right?

16 A. No.

17 Q. So when I ask you these questions, you are going to

18 understand I don't want any legal opinion from you or for you

19 to inform me of legal opinions you've gotten from others, fair

20 enough?

21 A. Yes.

22 Q. I just want to understand your personal understanding when

23 you concluded, as you said you did, that this transaction,

24 quote, fit within the covenants. So, 4.09, read along with me,

25 sir, that basically says, per Section A, that the company shall

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1 not directly or indirectly incur any indebtedness that causes

2 the consolidated leverage ratio to exceed 4.5 to 1, correct?

3 A. Yes.

4 Q. But then it had -- and you understand, sir, as you sit here

5 today, that if the court concludes that the sale and leaseback

6 transaction in fact violated the covenant and gave rise to

7 attributable debt, you would be over that covenant ratio,

8 that -- the consolidated leverage ratio as of the time of the

9 consent exchange transaction, right?

10 A. I have not done that calculation.

11 Q. You don't know?

12 A. I don't know.

13 Q. And you haven't read any of the company's answers to

14 contention interrogatories about that either?

15 A. I don't recall that at the moment but I haven't done the

16 calculation.

17 Q. All right. In any event, you agree with me, sir, that

18 there are then some exceptions that allow the company to exceed

19 the consolidated leverage ratio if you fit within the

20 exception, correct?

21 A. I agree that the provision is the provision.

22 Q. I'm sorry. Did you understand, sir, that 4.09, which you

23 told us is one of the covenants that you concluded the consent

24 and exchange transaction satisfied, did you understand that

25 4.09 has some exceptions where the company is allowed in fact

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1 to engage in that -- in a particular type of borrowing if it

2 fits within an exception, correct?

3 A. Yes.

4 Q. And one of those exceptions is romanette five that we have

5 called -- that is called in the Indenture the permitted

6 refinancing indebtedness exception. Do you see that?

7 A. Yes.

8 Q. All right. Now, I would like to put up that definition.

9 And you'll notice that it has a variety -- that this particular

10 exception, which is part of 4 point -- one of the exceptions to

11 4.09, has itself some subdivisions. Do you see that?

12 A. Yes.

13 Q. And when you concluded that this transaction, the exchange

14 consent transaction that closed on or about November 6th, when

15 you concluded that you had met this covenant, 4.09, one of the

16 things you looked at was subsection 1 of the definition of

17 "permitted refinancing indebtedness," correct?

18 A. In this transaction, I relied on our general counsel and

19 our external advisors to advise me about the ability for the

20 transaction to be in accordance with the Indenture.

21 Q. I appreciate that answer. All I asked you, sir, was

22 whether you, in deciding, as you claim you did, that this

23 transaction satisfied the covenants, whether you personally

24 looked at subsection 1 of the definition of "permitted

25 refinancing indebtedness," you either did or you didn't. Tell

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1 me.

2 A. I read this Section.

3 Q. All right. So the answer was yes. Thank you.

4 Now, let's look at that definition together. Can we?

5 I've broken down the definition of permitted refinancing

6 indebtedness so that it calls up only subsection 1. Do you see

7 that, sir?

8 A. Yes.

9 Q. And you'll notice that it -- that subsection 1, the first

10 thing it says -- read along with me and tell me if I am reading

11 it right -- the first proviso is that the amount of such

12 permitted refinancing indebtedness does not exceed the amount

13 of the indebtedness so extended, refinanced, etc. Do you see

14 that?

15 A. Yes.

16 Q. And you acknowledge in your affidavit, do you not, sir, in

17 paragraph 1.09, that the November exchanges, the ones -- you

18 know which I mean by that, the ones that closed on or about the

19 6th of November?

20 A. Yes.

21 Q. Which you call the first exchange offers, right?

22 A. Yes.

23 Q. You agree with me that that transaction increased the

24 indebtedness of the company by, according to paragraph 1.09 of

25 your affidavit, by some $31.9 million, yes or no?

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1 A. Yes.

2 Q. And that increase in indebtedness, sir, was the result of

3 the exchange ratios that the company used in the

4 November 6th exchange, correct?

5 A. Yes.

6 Q. In particular, the way it worked was that you issued more

7 principal amount of the new notes for the principal amount of

8 the old notes being refinanced, and as a result of that greater

9 face amount the total indebtedness of the company went up, did

10 it not?

11 A. Yes.

12 Q. Now, let's talk about your $31.9 million figure. That, am

13 I right, Mr. Gunderman, that's the net increase when you

14 consider the exchanges for the 2021 notes, the 2022 notes, the

15 April 23 notes, but also the 2020 notes, which were in fact

16 issued for secured debt, not the 6-3/8 unsecured, right?

17 A. Correct. There were secured notes issued for the 2020s and

18 21s.

19 Q. If you took the 2020s out because they were -- they were

20 not exchanged for the additional notes that were in the

21 Aurelius series, right?

22 A. Right.

23 Q. If you took those out of the calculation and you just asked

24 what was the effect on the indebtedness of the company, if you

25 look at only the notes that were exchanged into the 6-3/8

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1 August 2023s, those would be the 21s, the 22s, and the

2 April 23s, yes or no?

3 A. Yes.

4 Q. And if you only looked at those, the increase in debt would

5 be about $40 million, yes or no?

6 A. Yes.

7 Q. And as you say, the 2020 notes were exchanged for something

8 other than the 6-3/8 August 23s, right?

9 A. Yes.

10 Q. So in that connection, could I ask you to look at paragraph

11 109 of your affidavit.

12 MR. ROBBINS: And, Joe, could I ask you to just put

13 that up on the screen.

14 Q. And I just want to direct your attention to the last

15 sentence of your paragraph 109.

16 And you see where you wrote: "Of particular

17 importance, we exchanged approximately $338 million in

18 October 2020 and 2021 notes, which were the nearest maturities

19 of the senior unsecured notes, for new August 2023 notes."

20 That isn't right, is it?

21 A. The 21 notes were -- there was a portion of those that were

22 exchanged in the 23s.

23 Q. Yes. But there was no portion of the 2020s that were

24 exchanged for the August 2023 notes, was there?

25 A. I don't recall if there were.

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1 Q. Well, I'm sorry. Did I not ask you that question three

2 minutes ago?

3 A. Yes, you did.

4 Q. And what did you tell me three minutes ago?

5 A. That I didn't recall if there were any exchanged into the

6 2023 notes.

7 Q. I thought you told me there were none.

8 A. Yes.

9 Q. OK. Is that still your answer?

10 A. Yes.

11 Q. So is this last sentence of paragraph 109 of your sworn

12 testimony incorrect?

13 MS. KARIS: Your Honor, for completeness, I would ask

14 that the witness be shown the entire paragraph, which speaks to

15 the 2020 notes.

16 THE COURT: Counsel, the witness can answer.

17 Go ahead. Is the last sentence correct or not?

18 BY MR. ROBBINS:

19 Q. Mr. Gunderman.

20 (Pause)

21 A. We did in fact exchange 338 million of the 2020 and 21

22 notes, and a portion of that was for 23 notes.

23 Q. I'm sorry. Let me just try one more time and then I

24 promise to move on.

25 Was any -- was a single part of the October 2020

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1 series exchanged for new August 2023 notes, yes or no?

2 A. No.

3 Q. Thank you.

4 MR. ROBBINS: Now, Joe, can I ask you to go back to

5 the permitted refinancing indebtedness definition with

6 subsection 1 on it. Thank you.

7 Q. Now, after the Section that talks about -- that first

8 clause, I already drew your attention to about indebtedness,

9 that the amount of the new debt can't exceed the amount of the

10 old debt. Then there is a parenthesis. Do you see that?

11 A. Yes.

12 Q. And in the parenthesis, it says, well -- and just tell me

13 if this accords with your understanding when you concluded, as

14 you did, that the new notes fit within the covenants. Did you

15 understand that what this basically says is, look, you can

16 exceed the new notes -- the new debt can exceed the old debt to

17 the extent that that increase in indebtedness is used for one

18 of the purposes -- one or more of the purposes in the

19 parenthesis? Is that how you understood it when you concluded

20 as you did?

21 A. As I said earlier, my conclusion was based upon our

22 internal and external counsel's advice and that's what I relied

23 upon.

24 Q. I don't want any of that.

25 Did you form your own understanding as to whether the

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1 parenthesis in this definition allows the company to increase

2 the principal amount of its indebtedness if and only to the

3 extent that such increase in indebtedness is deployed for one

4 of the purposes prescribed by the parenthesis, yes or no?

5 A. No.

6 Q. You did not form that opinion?

7 A. I relied upon our internal and external counsel to advise

8 me on that.

9 Q. All right. I don't want to hear about their advice, but I

10 do want to hear about the word "premium," because you'll notice

11 in the parenthesis, there is a reference to something called a

12 "reasonably determined premium necessary to accomplish such

13 refinancings." Do you see that?

14 A. Yes.

15 Q. And you actually opine in your affidavit about whether or

16 not there was a premium paid in this transaction, correct?

17 A. Yes.

18 MR. ROBBINS: Joe, I'm going to work backwards a

19 little bit. Can I ask you to pull up paragraph 86 of

20 Mr. Gunderman's -- yes. There it is.

21 Q. Do you have that in front of you, sir?

22 A. Yes, I do.

23 Q. And in paragraph 86, you tell the Court, do you not, that

24 in utilizing the exchange ratios, what Services did was "ensure

25 that exchanging noteholders would receive what was essentially

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1 an economically equivalent amount of new August 2023 notes in

2 return (based on differentials in coupon rates and

3 maturities)."

4 Did I read that right?

5 A. Yes.

6 (Continued on next page)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 Q. And let me just ask you if I understand your point, in

2 paragraph 86. What you're saying is that, in the November 6

3 exchange, the new notes were basically the economic equivalent

4 of the old notes in that, once you adjust for maturity, the

5 longer maturity, and the lower coupon, what the old noteholders

6 got was, in value, the same as what they gave up. Correct?

7 That's your point.

8 A. Yes.

9 Q. And your point is, if there was an excess over that, which

10 you say there was not, that might be the premium, but you don't

11 think there was one. Correct?

12 A. Correct.

13 Q. And I asked you at your deposition about this, and you also

14 told me that there was no premium paid in the November 6

15 transaction. Yes or no?

16 A. Yes.

17 Q. And I showed you an interrogatory answer. In fact, let me

18 show it to you again. AX 312, please, Joe. Remember I showed

19 you this interrogatory answer provided by Windstream in the

20 course of discovery, where they answer, inter alia, "no premium

21 was paid to noteholders in connection with the exchange

22 offers." And I asked you if you agreed with that. And you

23 said what?

24 A. Yes.

25 Q. Let me show you a supplemental interrogatory, because I

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1 don't think I asked you about this at your deposition, but

2 let's show it to you now.

3 Here's a supplemental answer, interrogatory by

4 Windstream. I'll read you the highlighted section. "There was

5 not a premium incurred in connection with the issuance of the

6 new notes, as the exchange ratios merely compensated

7 bondholders for extending such maturities and exchanging into a

8 lower coupon note." And, sir, you agree with that too, do you

9 not?

10 A. Yes.

11 Q. All right.

12 THE COURT: For the record, that's AX 316,

13 interrogatory no. 5; is that correct?

14 MR. ROBBINS: That's correct, your Honor.

15 MR. TRUNK: Joe, you can take that down.

16 Q. And I'm going to change subjects with you, sir, and turn

17 from the indenture to something called the minimum issuance

18 condition. You've heard of that, right?

19 A. Yes.

20 Q. In fact, could I ask you to turn to paragraph 87 of your

21 affidavit. Tell me when you have it handy.

22 You got it, sir?

23 A. Yes.

24 Q. All right. Now, in paragraph 87, you testify that the

25 exchange offers were subject to certain, as you put it, certain

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1 overall conditions to becoming effective, end quote. You see

2 that?

3 A. Yes.

4 Q. And just so that it's crystal clear, what you're saying

5 here and discussing in the paragraphs that follow is that these

6 are conditions that had to be satisfied in order for the

7 issuance of the new notes to become effective. Correct?

8 A. Yes.

9 Q. And put another way, if one or more of those conditions was

10 not satisfied for some reason, the new notes, the ones that

11 were issued to dilute the Aurelius series, those would not be

12 validly issued, correct?

13 A. It was at our option to not accept the final terms of the

14 transaction.

15 Q. Well, if the condition wasn't satisfied, that was a

16 condition on the issuance of the new notes, correct?

17 A. What was the condition on the issuance of the new notes,

18 sir?

19 Q. The conditions that you refer to in paragraph 87 are

20 conditions for the effectiveness of the new notes, correct?

21 A. Correct.

22 Q. All right. Now, I want to talk about one of those

23 conditions with you. Would you look at paragraph 90 of your

24 affidavit. Tell me when you're there.

25 A. I see it.

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1 Q. Here you say "the second condition of the exchange offers"

2 was something you had labeled, Mr. Gunderman, the "August 2023

3 notes consent condition." Do you see that?

4 A. Yes.

5 Q. And you tell us in the next sentence exactly what that

6 condition required before the new notes would be issued.

7 Correct?

8 A. Yes.

9 Q. And that condition said that Services -- I apologize. Can

10 you hear me all right?

11 A. Yes, I can.

12 Q. "Services had to receive consents from beneficial holders

13 representing a majority of the outstanding aggregate principal

14 amount of the August 2023 notes approving the proposed waivers

15 and amendments." Correct?

16 A. Yes.

17 Q. Now, what I would like to do is, while we have this

18 provision in mind, I want to show you what is in evidence as AX

19 97, which is the 2022, 2023 exchange offering memo. I am going

20 to direct your attention to page 520 of that document.

21 MR. ROBBINS: Joe, could I ask you to put on the

22 screen the language from that section.

23 Q. I think you can see this with me, Mr. Gunderman. First of

24 all, you recognize this as from the -- as a provision in the

25 exchange offering memo for the 2022/2023 exchange?

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1 A. Yes.

2 Q. All right. And in this language, it says, does it not,

3 that one of the conditions is that the exchange offers, it

4 says, are conditioned upon, and then there's some other

5 language, which we'll come to later, but then it says

6 "obtaining the requisite consents from holders representing a

7 majority of the outstanding aggregate principal amount of the 6

8 3/8 notes." You see that?

9 A. Yes.

10 Q. And this, sir, this is the language that you had in mind

11 when, in paragraph 90 of your affidavit, you set out for the

12 Court what you call the August 2023 notes consent condition.

13 Correct?

14 A. Yes.

15 Q. And so that we're here, the word "outstanding" in this

16 definition, which I've tried to highlight, not only making it

17 super bold but underscored with red, Mr. Gunderman, what that

18 means, what that word means is that a note, to be outstanding,

19 means that it has already been authenticated and issued to the

20 public. Right? That's what it means for notes to be

21 outstanding.

22 A. Yes.

23 Q. All right. You then point out, in paragraph 92 -- I will

24 ask you to go back to paragraph 92 -- you then point out that

25 the company made some changes to the conditions that had to be

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1 satisfied before the new notes could be issued. Correct?

2 A. Yes.

3 Q. And you tell the Court, in paragraph 92, that when you made

4 these changes to the conditions, at least the ones that you

5 characterize as nonmaterial, in paragraph 92, when you made

6 such changes, you announced them in two different ways,

7 correct?

8 A. Yes.

9 Q. That's what you tell us in your affidavit, right?

10 A. Yes.

11 Q. And one of the ways is through press releases, right?

12 A. Yes.

13 Q. And the other way that you did it was through something you

14 called supplemental offering memos that are disseminated to

15 beneficial holders, correct?

16 A. Yes.

17 Q. And just so we're clear, a supplemental offering memo is

18 some change to that big thick document I showed you page 520

19 from a minute or two ago, right?

20 A. Yes.

21 Q. So we've got press releases is one way you tell the world,

22 and then supplemental offering memos are the other way you tell

23 the world. And I want to talk to you about the second way

24 first. When you use supplemental offering memos to apprise

25 beneficial holders of changes to conditions, you used a company

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1 called global noteholder -- Global Bondholder Services.

2 Correct?

3 A. Yes.

4 Q. Tell us who they are.

5 A. They are an agent that, you know, facilitates, you know,

6 transactions of this type for, you know, bondholder and

7 company, you know, exchange of, you know, recordkeeping for

8 lack of a better word.

9 Q. All right. But just so that we're clear, what, at least

10 for present purposes, what those fellas are supposed to do, to

11 do their job for you, is, they're supposed to pay, among other

12 things, the supplemental indentures that you give them and

13 they're supposed to circulate them to beneficial holders like

14 Aurelius. Right?

15 A. Yes.

16 THE COURT: All right. Mr. Robbins, it's 11:45

17 exactly, so we're going to take our break there.

18 Mr. Gunderman, you are not supposed to speak with any

19 counsel during the break and should be back here -- we're going

20 to break for half an hour. So you should be back here at 12:14

21 or thereabouts and be prepared to continue with your testimony.

22 And if folks can just stay seated for one moment so everybody

23 can hear. Mr. Robbins, just for my planning purpose, any

24 estimate on how long your cross is likely to be after the

25 break?

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1 MR. ROBBINS: 20 minutes, your Honor.

2 THE COURT: Very good. So I assume we're going to get

3 to least Mr. Prieto and perhaps Mr. Cheeseman today?

4 MR. ROBBINS: My understanding is that Mr. Cheeseman

5 has a scheduling conflict. We have agreed with Windstream that

6 since he needs to be on and off tomorrow morning, we have

7 agreed, if it's OK with the Court of course, to take him out of

8 turn and interrupt such other testimony to accommodate his

9 schedule. So Cheeseman will not be here today. Our

10 expectation instead is that our expert, Dr. Sabry, who is

11 already here in court, will be the next witness, after

12 Mr. Prieto is finished.

13 THE COURT: All right.

14 Mr. Godfrey, is that correct?

15 MR. GODFREY: That is correct, although I may spend

16 more time with Mr. Prieto than my colleagues had originally

17 allowed.

18 THE COURT: Very good.

19 Anything we need to discuss before the breaks?

20 MR. ROBBINS: I don't think so, your Honor. Let me

21 just mention --

22 THE COURT: Can you mention it into a microphone,

23 though?

24 MR. ROBBINS: I'm sorry. I just want to give to the

25 Court and my colleagues across the aisle a heads up on one

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1 thing, which is that before Mr. Prieto begins his testimony, I

2 want to call a couple of legal issues relating to that

3 testimony to the Court's attention before it begins, if that's

4 OK with the Court. I would ask Mr. Prieto to step out of the

5 room, though he is the company's, the firm's witness

6 representative. I would ask him to step out so that we can air

7 those questions outside of his purview.

8 THE COURT: OK. We'll take it up at that time. It's

9 intriguing. Leave me in suspense.

10 MR. GODFREY: I'm not sure it's intriguing, your

11 Honor. I would have thought this was something that well in

12 advance could have been raised and if necessary briefed. But

13 I'll handle it. We'll take care of it.

14 THE COURT: All right. We'll, we'll see what it is.

15 That's what makes it intriguing.

16 It is now 11:47. So to give you the full half-hour

17 break, we'll pick up again at -- oh, it's 11:48. We'll pick up

18 at 12:18. And, Mr. Gunderman, you should be back on the stand

19 at 12:17, please. Thank you.

20 (Recess)

21

22

23

24

25

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1 A F T E R N O O N S E S S I O N

2 12:17 p.m.

3 ROBERT GUNDERMAN, resumed.

4 THE COURT: I just wanted to remind Mr. Gunderman that

5 you are still under oath.

6 And we will continue with cross-examination by counsel

7 for Aurelius.

8 MR. ROBBINS: Thank you, your Honor.

9 BY MR. ROBBINS:

10 Q. And good afternoon, Mr. Gunderman. May I ask, during the

11 break that we just took during the last half hour, did you

12 notice any other changes that you want to make to your

13 affidavit now?

14 A. I didn't review it during lunch, so no.

15 Q. All right. So I was just before the break asking you about

16 an entity called Global Bondholder Services. I believe you had

17 just told me that one of their functions for Windstream on this

18 transaction was to see that supplements to the exchange offer

19 memos were circulated to beneficial holders, correct?

20 A. Yes.

21 Q. Now, in your affidavit, you note that a couple of changes

22 were made to the minimum issuance -- to the conditions on the

23 effectiveness of the exchange. Correct? Certain conditions

24 were changed. Right?

25 A. Yes.

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1 Q. And I want to explore a couple of those changes with you.

2 But first, I want to sort of clean up the record a little bit

3 with you. Could I ask you to look at paragraph 95 of your

4 affidavit. Tell me when you're there.

5 A. I see it.

6 Q. All right. And you point out, in 95, that Windstream

7 reduced the minimum issuance threshold from 587 million to 282

8 million. Correct?

9 A. Yes.

10 Q. And in paragraph 96, you tell the Court that the reason

11 that you reduced that issuance threshold was because you

12 discovered that you did not need as many old notes to exchange

13 to the new and 6 3/8 notes in order to dilute Aurelius's

14 position, correct?

15 A. We decided that we didn't need as many notes.

16 Q. Well, let's try my question, which was, one of the things

17 you determined was that you didn't need as many old notes to

18 exchange into new notes in order to able to dilute Aurelius's

19 position. Correct?

20 A. Yes.

21 Q. All right. And in paragraph 96, you tell the Court that

22 this change, from 587 million to 282 million, was reflected in

23 what you call the first supplemental offering memorandum.

24 Correct?

25 A. Yes.

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1 Q. And you tell the Court in the last sentence of paragraph 96

2 that Exhibit 91 is a true and correct copy of the first

3 supplemental offering memorandum reflecting that change.

4 Correct?

5 A. Yes.

6 Q. Could I ask you to take a look at Exhibit 91 in your

7 notebook.

8 A. 91?

9 Q. Yes. It should be there. It may not be in numerical order

10 exactly, but I think you will find Exhibit 91. And if you

11 don't, it's on your screen.

12 Do you have it, sir?

13 A. Yes.

14 Q. Can I ask you, would you agree with me, sir, that it turns

15 out Exhibit 91 is actually not a true and correct copy of the

16 first supplemental offering memo, is it?

17 A. If this is Exhibit 91, I would agree it's not.

18 Q. Well, you see the WIN number on the bottom?

19 A. Yes.

20 Q. And that says, does it not, "WIN-91." Right?

21 A. Yes.

22 Q. And if that is in fact WIN 91, it isn't the first

23 supplemental offering memo, is it?

24 A. No.

25 Q. So your statement is not correct. Right?

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1 A. When I made the statement, I assumed that I had -- was

2 referencing the right document. If there was a difference in

3 the exhibit numbering before the final submission, it wasn't to

4 my recollection.

5 Q. All right. But in any event, even if you got the wrong

6 exhibit, you're at least pretty confident as you sit there

7 today that the first supplemental offering memo, whatever the

8 right number is, does in fact have in it, as you say in

9 paragraph 96 -- I'm sorry, 95 and 96 -- when we finally get to

10 the first supplemental memo, we will find that it reflects the

11 reduction in the minimum issuance threshold from 587 to 282.

12 Right?

13 A. Yes.

14 Q. All right. Let's do that. In your notebook, you will find

15 what I think is actually the first supplemental offering memo.

16 And I will ask you to turn to Exhibit AX 135, and tell me if

17 that is in fact the first supplemental offering memo that you

18 had in mind when you wrote paragraphs 95 and 96 and swore to

19 them in your affidavit.

20 A. AX 135?

21 Q. Yes, sir. Is that it? It's the document that says "first

22 supplement to offering memorandum" at the top.

23 A. Yes.

24 Q. And this is actually the first supplement, isn't it?

25 A. Yes.

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1 Q. So we should be able to find in it, as you swore in 95 and

2 96, we should be able to find the portion of the first

3 supplement that reduces the minimum issuance threshold from 587

4 to 282. Right?

5 A. Yes.

6 Q. Go ahead and find it.

7 Have you looked so far, Mr. Gunderman?

8 A. Not yet.

9 Q. OK. Tell me when you're done.

10 Anything there, sir?

11 A. No.

12 Q. Can I ask, sir, when you wrote and swore to paragraphs 95

13 and 96, did you actually look at Exhibit 91, which you cited,

14 or Exhibit 195, which actually is the first supplement? Did

15 you do either of those things?

16 A. I recall checking the exhibits. As I sit here today I

17 don't recall exactly the numbering. But I do recall checking

18 the exhibits.

19 Q. All right. Now, setting aside the first supplement, we can

20 agree, can we not, that Global Bond Services did in fact

21 circulate the first supplement to the exchange offering memo to

22 beneficial holders of Windstream notes, did it not?

23 A. That's my recollection.

24 Q. And now let me ask you to look at paragraph 97 of your

25 affidavit. Tell me when you're there.

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1 A. I see it.

2 Q. And in 97, Mr. Gunderman, one of the things you tell the

3 Court is that the company reduced the issuance threshold

4 condition even further, from 282 million to 247 million,

5 correct?

6 A. Yes.

7 Q. And you point out that when the company made that

8 particular change to the conditions on the issuance of the new

9 notes, it reflected that change in a press release, which is

10 Exhibit 126. Right?

11 A. Yes.

12 Q. And in paragraph 98 of your affidavit, you say that the

13 company memorialized that further reduction in the issuance

14 condition in a second supplemental offering memorandum.

15 Correct?

16 A. That's my recollection, yes.

17 Q. And as you sit here today, Mr. Gunderman, you know, do you

18 not, that, for one reason or another, Global Bondholder

19 Services did not circulate that second supplement to Windstream

20 beneficial holders. Correct?

21 A. I don't recall the exact details. I relied on my general

22 counsel and transaction advisors to handle those legal steps.

23 Q. I appreciate. But I ask you this question. You know as

24 you sit here today, do you not, that Global Bondholder Services

25 failed to circulate the second supplement to beneficial

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1 holders. Yes or no? You know that, do you not?

2 A. Yes.

3 Q. Thank you. Which means, does it not, Mr. Gunderman, that,

4 as best you know, the beneficial holders of the '22s and the

5 April '23 notes did not receive the second supplemental

6 exchange offering memo?

7 MRS. KARIS: Object to foundation.

8 THE COURT: Well, as far as you know. Do you have any

9 reason to believe that those bondholders received the second

10 supplemental?

11 THE WITNESS: We made public announcements of it, and

12 so, again, I -- those steps were taken by our attorneys, and

13 that --

14 Q. Well, you say you made public announcements. What you mean

15 is that, if they didn't get the second supplement from Global

16 Bondholders, maybe they could look at press releases, which you

17 told us earlier in your affidavit was the second way that you

18 announced changes when you announced them. Right?

19 A. Yes.

20 Q. So if they didn't get the second supplement -- and I will

21 represent to you that there is a stipulation, in evidence,

22 signed by the parties and entered by the Court, that Global

23 Bondholder Services did not circulate the second supplement.

24 So if they didn't, the other way, you think, that beneficial

25 holders like my client might have received the information, the

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1 changes that you made to the conditions would be through a

2 press release. Correct?

3 A. That's another way. Yes.

4 Q. That's the only other way. Correct?

5 A. That's the only way that I recall, yes.

6 Q. All right. Now, here's what I want to do. I want to show

7 you the language from three different documents. I'm going to

8 show you, put it up on the screen, there is language from three

9 different documents, and I want to take you through it. At the

10 top, that's the language we looked at early in my examination.

11 Do you remember that, sir?

12 A. The top section under Exchange Offers? Yes.

13 Q. Remember when I showed you page 522 of AX 97, that was the

14 original 2022/23 offering memo. Remember we did that?

15 A. Yes.

16 Q. And you told me that this condition means that you've got

17 to obtain the requisite consents from holders representing a

18 majority of the outstanding aggregate principal amount of the

19 6 3/8 notes. Remember that?

20 A. Yes.

21 Q. And we had a little colloquy about what the word

22 "outstanding" meant. Remember that?

23 A. Yes.

24 Q. Now, there was also a 2021 offering memo. Do you see that?

25 A. Yes.

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1 Q. And this is in evidence at AX 97, page 305. And I want you

2 to look at the parallel language in the 2021 offering memo,

3 which is also highlighted. Do you see that?

4 A. Yes.

5 Q. And this one says that the offer is conditioned upon

6 obtaining, on or prior to the applicable settlement date,

7 including substantially concurrently with, or as a result of

8 settlement on such date, the requisite consents, etc. Do you

9 see that?

10 A. Yes.

11 Q. And we can agree, can we not, sir, that that language is

12 different from the language in the 2022/2023 offering memo, can

13 we not?

14 A. Yes.

15 Q. Now, you told the Court in your affidavit that you created

16 a second supplement. Right?

17 A. Yes.

18 Q. And the second supplement I've pulled out from AX 175 at

19 page 25. And do you see that in front of you, sir?

20 A. Yes.

21 Q. Which of the two above it does that appear to be like? Is

22 it like the 2021 or the original 2022/2023?

23 A. The 2021 offering memorandum.

24 Q. All right. So what happened here, Mr. Gunderman, am I

25 correct, is that the company, Windstream, sought to change the

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1 what you will call the August 2023 condition so that the

2 language in the 2022/2023 offering memo would be the same as

3 the 2021 and different from what it had been originally.

4 Correct?

5 A. These documents would indicate the 2021 and second

6 supplement match, so that's -- that's the documents.

7 Q. I'm sorry. Did I get a yes? I couldn't tell. Yes or no.

8 A. Could you ask your question again, please.

9 Q. I'd be glad to. I asked you, isn't it the case that what

10 the company sought to do, in the second supplement, was to try

11 to conform the August 2023 condition on the effective issuance

12 of the new notes so that it paralleled, and not just

13 paralleled, so that it matched the language in the '21

14 memorandum. Correct?

15 A. Yes.

16 Q. And that's the language that didn't get circulated by

17 Global Bondholder Services. Correct?

18 A. Correct.

19 Q. So if the bondholders were supposed to hear about this

20 change, this particular change, the other source they could go

21 to would be your press releases. Correct?

22 A. Yes.

23 Q. But you know as you sit here today, don't you, that the

24 press release made no mention of this language change?

25 A. I don't recall whether it did or didn't. I didn't review

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1 that before this testimony.

2 Q. Well, let's do it together. Exhibit 126, could I have

3 that, please. Here's the language from Exhibit 126, the press

4 release you mentioned. And can we agree that it does not alert

5 anybody to this language change? And you're welcome to look at

6 126 in your binder. You're welcome to look at the snapshot

7 that I put on the screen, whichever is more helpful to

8 providing an answer.

9 A. What was your question again, sir?

10 Q. My question is, does the press release even mention this

11 language that the company tried to change from the original

12 2022/23 exchange offering memo in the attempted second

13 supplement?

14 A. And what was the -- I don't have the -- what was the other

15 exhibit?

16 Q. 126. It's the exhibit that you cite in paragraph 97 of

17 your affidavit, sir.

18 A. Would you put that back up on the screen.

19 Q. I think it is on the screen.

20 A. Well, I have 126 in front of me. I was asking if you could

21 put back the one you referenced earlier as a comparison.

22 Q. Oh, OK.

23 MR. ROBBINS: Let's go back, Joe, then to the -- yes.

24 Q. Do you see the second supplemental language that you tried

25 to adopt?

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1 A. Yes.

2 Q. And can you find any reference to that language change in

3 the press release that you've cited, sir?

4 A. One moment, please.

5 Q. Of course.

6 A. In my quick review, I did not see the exact language, no.

7 MR. ROBBINS: All right. You can take that down.

8 Q. Now I'd like to show you another document, which is a

9 submission in docket 165. I will represent to you, sir, that

10 these are Windstream's proposed findings of fact and

11 conclusions of law submitted to the Court.

12 MR. ROBBINS: And, Joe, may I ask you to pull up

13 paragraph 299 of the Windstream submission to the Court. Let

14 me just ask you, can we go back to the first page a minute,

15 Joe, for one second.

16 Q. You know that counsel was submitting proposed findings of

17 fact to the Court?

18 A. I did. I don't recall all the details of it, but I do know

19 that we were submitting those.

20 Q. I don't want any privileged communications. I just want to

21 know if you looked at the document before it was submitted.

22 A. I don't recall if I did or didn't as I sit here today.

23 Q. OK. Well, in any event, let's go to paragraph 299. And

24 you'll see, sir, that it is represented that the minimum

25 issuance condition was satisfied because -- read along with

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1 me -- "it required that Services receive the consents

2 substantially concurrently with settlement of the first

3 exchanges, including as a result of settlement of the first

4 exchange offers." Do you see that?

5 A. Yes.

6 Q. Now let's go back to the slide with the three comparators.

7 MR. ROBBINS: Joe.

8 Q. That language, in 299, you can find that, can you not, sir,

9 in the second supplement. Correct?

10 A. Yes.

11 Q. And you can find that, can you not, in the '21 offering

12 memo. Correct?

13 A. Yes.

14 Q. You cannot find it in the original offering memo, can you?

15 A. No.

16 Q. And am I right, sir, that if the Court concluded -- I

17 realize I'm asking you to assume something -- if as a result of

18 this analysis there was a conclusion that the original offering

19 memo and not the second supplement was the only controlling

20 contract for the 2022/2023 notes, would you agree with me, sir,

21 that it is not true, that it is not true that the company

22 obtain the requisite consents from holders representing a

23 majority of the outstanding aggregate principal amount of the

24 6 3/8 notes as of November 6?

25 MRS. KARIS: Objection, your Honor. Calls for a legal

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1 conclusion.

2 THE COURT: Sustained.

3 Q. Let me try this. As of November 6, 2017, which notes in

4 the 6 3/8 series were actually outstanding?

5 A. What date?

6 Q. As of November 6, which were the, quote, outstanding

7 aggregate principal amount?

8 A. I don't remember the exact amount, but they're all in our

9 public documents.

10 Q. They are in fact the existing 6 3/8 notes, are they not?

11 A. If that's in fact what happened before the close date, then

12 yes.

13 Q. Well, am I right, sir, that unless and until the new notes

14 issued, unless and until the new notes became effective, the

15 only 6 3/8 notes that were outstanding were the ones already

16 held by the existing 6 3/8 noteholders? Yes or no.

17 A. I'm not an attorney, but it seems reasonable to conclude

18 that.

19 MR. ROBBINS: Your Honor, at this time I pass the

20 witness.

21 THE COURT: All right. Redirect, part two.

22 MRS. KARIS: Thank you, your Honor.

23 REDIRECT EXAMINATION

24 BY MRS. KARIS:

25 Q. Mr. Gunderman, I'd like to begin where counsel just ended,

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1 with respect to the language of the minimum issuance allowance

2 and the various versions that you were shown. To this day, has

3 anyone other than Aurelius complained about not receiving

4 proper notice with respect to those notes and the conditions of

5 those notes?

6 A. I'm not aware of anyone.

7 Q. Do you talk to investors daily?

8 A. Maybe not daily, but it wouldn't surprise me if I talk to

9 investor several times a week.

10 Q. Frequently.

11 A. Frequently.

12 Q. Probably a better word.

13 A. Certainly within the context of these transactions

14 frequently.

15 Q. And so in those frequent discussions that you've had from

16 November 7th of 2017 until today, has anyone indicated to you

17 they did not receive adequate notice or information regarding

18 the issuance of the indenture?

19 A. No.

20 Q. The new notes.

21 A. No.

22 Q. You were asked at the beginning of your examination about

23 permitted refinancing and the definition of "indebtedness." Do

24 you recall those questions?

25 A. Yes.

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1 Q. To this day, has anyone, any investor that you interact

2 with, indicated that they do not believe that you satisfied the

3 conditions of permitted indebtedness as defined by the new

4 notes, the third supplemental indenture?

5 A. No.

6 Q. That is, other than Aurelius. Correct?

7 A. I'm not conversing with Aurelius on a regular basis.

8 Q. Fair enough.

9 Mr. Robbins asked you several questions about the

10 exhibit numbers in your affidavit. Did you look at the

11 exhibits that were referenced in your affidavit?

12 A. Yes.

13 Q. Did you try and do a comparison of what numbers counsel

14 assigned to those exhibits?

15 A. No.

16 Q. I want to focus your attention on paragraph 109. And if we

17 can pull up from Exhibit 193 paragraph 109 which you were asked

18 about, page 31. And if we can blow up the last sentence of

19 paragraph 109, which is the sentence you were asked about.

20 Do you recall Mr. Robbins asked you whether that

21 sentence that says, "of particular importance, we exchanged

22 approximately 338 million in October 2020 and 2021 notes, which

23 were the nearest maturities of the senior unsecured notes, for

24 new August 2023 notes" --

25 A. Yes.

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1 Q. Do you recall those questions? Let's go to the beginning

2 of that paragraph. At the beginning of the paragraph you say,

3 "The presentation reflects that in connection with early

4 settlement of the first exchange offers, we exchanged 511.6

5 million in October '21, June '22, October '23 notes for 553.7

6 million in new August 2023 notes. Do you see that?

7 A. Yes.

8 Q. Let's go to the prior paragraph for a second, paragraph

9 108. There's a reference there to a presentation that is made

10 on November 7th of 2017 that has Exhibit No. 82. Do you see

11 that?

12 A. Yes.

13 Q. Is that the presentation that you're talking about then in

14 the following paragraph?

15 A. Yes.

16 Q. OK. Let's go back to 109. Just to reorient ourselves,

17 when you say "the presentation reflects," what presentation we

18 are talking about, are the amounts that are stated in the

19 affidavit true and accurate to the best of your knowledge,

20 consistent with that presentation that we just looked at?

21 A. Yes.

22 Q. Now, you were asked speak by about that 338 million figure.

23 Do you recall that?

24 A. Yes.

25 MRS. KARIS: And, your Honor, if I may approach and

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1 give Mr. Gunderman Exhibit 132.

2 THE COURT: OK. I'm amazed that there was something

3 left out of the binders.

4 MRS. KARIS: I didn't think this would be an issue,

5 but it was raised.

6 Q. Do you recognize Exhibit 132, which is dated November 7th,

7 and it says "Windstream analysis, early settlement of exchange

8 offers and updates to consent solicitation"?

9 A. Yes.

10 MR. ROBBINS: Could I ask, the binder I have doesn't

11 have 132 in it.

12 MRS. KARIS: I'm sorry. I apologize. Let me give you

13 a copy. That's because we didn't think this would be an issue.

14 But since you asked about it -- very well.

15 THE COURT: All right, as long as counsel has a copy.

16 MRS. KARIS: Very well.

17 Q. Do you recognize this as the press release that was made on

18 November 7th when the transaction closed?

19 A. Yes.

20 Q. And under 2021 -- and, again, the sentence that we were

21 just looking at is talking about the 2020 and 2021 notes for

22 338. Correct?

23 A. Yes.

24 Q. Under 2021, what does this say about the amount that was --

25 I'm sorry. Let's pull it up. The first sentence under "2021

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1 exchange offer."

2 A. "On the early settlement date, pursuant to the 2021

3 exchange offer, the issuance accepted" --

4 THE COURT: Slow down a little bit, Mr. Gunderman, so

5 that the court reporter can keep up.

6 THE WITNESS: Excuse me.

7 A. "On the early settlement date, pursuant to the 2021

8 exchange offer, the issuers accepted for exchange 179,871,000

9 aggregate principal amount of 2021 notes in exchange for

10 139,843,000 aggregate principal amount of new 6 3/8 notes and

11 approximately 50 million (the '2021 maximum exchange amount')

12 aggregate principal amount of 8.625 percent senior first lien

13 notes due 2025 of the issuers (the 'new secured notes')."

14 Q. OK. And under the 2020 -- and you don't have to read it

15 into the record -- the document speaks for itself -- but just

16 tell us, what is the dollar figure of 2020 notes that were

17 exchange in connection with the November 7th transaction?

18 A. 2021 or 2020s?

19 Q. 2020s.

20 A. 2020s. 157,970,000.

21 Q. And I'll represent to you, Mr. Gunderman, that if you add

22 179.8 and 157.9, that that comes out to 338, which is the

23 figure in your affidavit.

24 A. Yes.

25 Q. Is the statement in your affidavit the --

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1 THE COURT: Only with a little rounding, just for the

2 record.

3 MRS. KARIS: Fair enough. And that's why it says "we

4 exchanged approximately."

5 THE COURT: I think I can take judicial notice of some

6 math.

7 MRS. KARIS: Thank you. Thank you, your Honor.

8 Q. So is the statement in your affidavit accurate?

9 A. Yes.

10 MRS. KARIS: And again if I could approach, your

11 Honor, this is another exhibit not in the affidavit, as a

12 result of cross of counsel.

13 THE COURT: All right. You may.

14 MRS. KARIS: Thank you.

15 Could we pull up Exhibit 125, please.

16 BY MRS. KARIS:

17 Q. You were asked some questions about the change in minimum

18 issuance conditions from 587 to 582. Do you recall those

19 questions and then the reference made to your affidavit?

20 THE COURT: I think it was 282. Is that --

21 MRS. KARIS: I'm sorry. 282. Correct. I stand

22 corrected.

23 A. Yes.

24 Q. Tell us what is Exhibit 125 that is on the screen, so we

25 can look at the details of it.

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1 A. It's a Windstream press release announcing the extension of

2 consent solicitation and amendments to our exchange offers.

3 Q. And if we go down to Exchange Offers, the second paragraph

4 there, the first sentence, does this press release announce the

5 change of the minimum issuance condition from 587 million to

6 282 million?

7 A. Yes.

8 Q. Mr. Gunderman, let me ask you this. How would you describe

9 the bondholders of Windstream notes? Are they sophisticated,

10 unsophisticated? You tell us.

11 A. Very sophisticated.

12 Q. And based on your regular dealings and interactions with

13 them, do they follow, to your knowledge, do they follow the

14 press releases that the company issues?

15 A. Yes.

16 Q. And this particular transaction, was there interaction with

17 the bondholders as a result of trying to discuss the terms,

18 discuss the closing date, and the like?

19 A. Yes. I recall that feedback being provided to me from our

20 investor relations team, and I recall some discussion from

21 investors.

22 Q. And to your knowledge, were they following the press

23 releases that the company was issuing in connection with this

24 exchange?

25 A. Yes.

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1 MRS. KARIS: Just one second, your Honor?

2 I have no further questions. Thank you.

3 THE COURT: All right. Any recross?

4 MR. ROBBINS: Briefly, your Honor.

5 May I have 109 again, paragraph 109, last sentence,

6 Joe, please.

7 RECROSS EXAMINATION

8 BY MR. ROBBINS:

9 Q. Three minutes ago, Mr. Gunderman, you said, when presented

10 with WIN 132, the November 7th press release, that that had --

11 upon seeing that, you now thought your last sentence in

12 paragraph 109 was correct after all. Was that your testimony?

13 A. My testimony was, I believe that my affidavit correctly

14 described the transaction.

15 Q. Am I right, sir, that that press release does not indicate,

16 because it is not true, that any 2020 notes were actually

17 exchanged for new August 2023 notes, as you assert in that

18 sentence? Correct?

19 A. We did not exchange 2020 notes for '23 notes.

20 Q. Right. And the press release that Ms. Karis showed you

21 don't say otherwise, because if it did it would also be false,

22 wouldn't it?

23 A. Yes.

24 Q. You also told Ms. Karis that bondholders, Windstream

25 bondholders, are sophisticated folks, right?

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1 A. Yes.

2 Q. And because they are sophisticated folks, one of the things

3 they are sophisticated about is, they pay close attention to

4 your press releases. Right?

5 A. Yes.

6 Q. And in fact Ms. Karis directed your attention to press

7 release WIN 125, the October 25th, 2017 press release, and

8 showed you, did she not, that it announced that the issuance

9 condition, from 587 to, I guess, 282, that was told to these

10 sophisticated bondholders reading your press releases, correct?

11 A. That is my expectation, yes.

12 Q. So even though they didn't get it in a first supplement, or

13 a second supplement, they got that information. That is to say

14 the drop in issuance threshold, they got that in the press

15 release that Ms. Karis showed you. Right?

16 A. Yes.

17 (Continued on next page)

18

19

20

21

22

23

24

25

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1 Q. But one thing those bondholders, with all their

2 sophistication, could not have discerned from Exhibit 125 is

3 the language that you tried to change for the August 2023

4 condition, correct?

5 A. I don't recall trying to change any language with that

6 intention.

7 MR. ROBBINS: I'm sorry. Can we, Joe, put back up the

8 three comparators.

9 Q. We went through this before, did we not, sir?

10 A. Yes.

11 Q. This was your -- the company was trying to copy the version

12 of the August 2023 condition that was in the 21 offering memo,

13 right or wrong?

14 A. Right.

15 Q. That language, that attempted change in language, that did

16 not get to them through the second supplement, is there

17 anything in WIN 125 that Ms. Karis showed you that would alert

18 all those sophisticated beneficial holders to the change in the

19 August 2023 -- the attempted change to the August '23 condition

20 that I have displayed on the screen, yes or no, is there

21 anything?

22 A. No.

23 MR. ROBBINS: I pass the witness again, your Honor.

24 THE COURT: All right. I think we can probably let

25 him go at this point.

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1 Mr. Gunderman, you are excused. You may step down.

2 (Witness excused)

3 THE COURT: And the next witness for Aurelius is

4 Mr. Prieto, is that right?

5 MR. ROBBINS: That is correct, your Honor.

6 THE COURT: Why doesn't somebody retrieve the binders

7 while somebody else gets Mr. Prieto.

8 MR. ROBBINS: He is here. You recall, I said before

9 the break I would like him to step out while I just alert the

10 Court to three legal issues, which I've already alerted

11 Kirkland to.

12 THE COURT: OK. Mr. Prieto, if you don't mind

13 stepping out for a moment.

14 MS. KARIS: Your Honor, I was going to step up and

15 clear any binders that are left there. If that is OK?

16 THE COURT: Go ahead.

17 (Pause)

18 MR. ROBBINS: May I proceed, your Honor?

19 THE COURT: You may.

20 MR. ROBBINS: I just wanted to -- rather than sort of

21 make these objections on the fly, I wanted to just alert the

22 Court to three sets of issues that arose during the deposition

23 of Mr. Prieto and which I think I can responsibly represent are

24 apt to come up again now.

25 The first is that the great number of the documents

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1 about which he is apt to be examined are documents that were

2 heavily lawyered and reflect communications with counsel.

3 Therefore, there may be questions --

4 THE COURT: Can I interrupt for one moment? I can't

5 see the outside door so perhaps it is closed, but I just want

6 to make sure, if Mr. Prieto isn't to be in here, that he can't

7 hear us.

8 A VOICE: The door is closed.

9 THE COURT: Great. Thank you, sir.

10 Carry on.

11 MR. ROBBINS: So there are apt to be privilege

12 objections or objections counseling the witness to exclude

13 privileged communications from an answer. I know Mr. Godfrey

14 is sensitive to that issue and we'll have that in mind.

15 The other two I just want to mention quickly.

16 The second one is that a number of the likely areas

17 that surfaced at the deposition we believe have been foreclosed

18 by your Honor's discovery rulings relating to whether or not

19 Aurelius does or doesn't hold a CDS position, when they bought

20 their notes, when they acquired their notes, what their beliefs

21 or intentions were with respect to different actions they made

22 in the Court's discovery order of February 27, 2018, as well as

23 in a transcript from the previous October. The Court held that

24 this range of discovery was off limits.

25 THE COURT: I've familiarized myself with the record

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1 on that so you don't need to remind me what my ruling was.

2 MR. ROBBINS: I'm sorry, your Honor. It comes up in a

3 variety of forms, and I would not be surprised if it comes up

4 again today.

5 And the last issue is that there were questions at the

6 deposition, and there have been exchanges of emails leading me

7 to think there will be questions today, relating to settlement

8 conversations and the content of settlement discussions for

9 what settlements Aurelius did or did not have in mind at

10 particular moments in time. I think all of that is off limits.

11 I will have a range of objections. But since it came up before

12 and I have some good faith basis to think it will come up

13 again, I wanted to alert the Court before we get into

14 discussions about settlements and settlement thoughts and

15 proposals.

16 THE COURT: All right. I'll hear from Mr. Godfrey on

17 that in one moment.

18 But going back to the question of Aurelius' trading

19 position and the like, I guess I would like to discuss that a

20 little further. And here is my -- and I was planning to

21 address this when Dr. Sabry's testimony came up because there

22 was a whole range of objections to her affidavit on this

23 ground.

24 MR. ROBBINS: I know.

25 THE COURT: The sword-and-shield objections, if you

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1 will. For reasons that I will explain then, I find those

2 objections not compelling. But one of the reasons is -- and I

3 did look back at the litigation of these issues during

4 discovery -- it was news to me that Windstream had any --

5 sorry, that Windstream never made, as far as I know, the

6 argument that Aurelius' trading position and when and whether

7 it acquired credit default swaps or what have you would be

8 relevant to the valuation issues that are raised in Dr. Sabry's

9 affidavit. That is to say, the arguments that were made back

10 in October, when I first ruled on this, and then I think back

11 in February, when it came up again, pertain to things like

12 clean-hands arguments, delay arguments and the like, and no one

13 ever made the argument that it was relevant to the valuation of

14 the notes and whether and to what extent that valuation was

15 affected by whatever trading positions Aurelius took in them.

16 So, I mean, I'll figure out, I suppose, what the

17 implications of that are, but I think it is a little late in

18 the game for Windstream to be arguing that those issues are

19 relevant for that reason because they were not made during

20 discovery.

21 I guess the question I have for you is your position,

22 I take it, is that they should not be allowed to even inquire

23 about the trading history of Mr. Prieto?

24 MR. ROBBINS: I think that's controlled by the Court's

25 previous rulings. And I think that there is nothing in the

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1 let's call it the sword-and-shield argument, which I regard as

2 at best a form of anemic cross for this expert when she takes

3 the stand, and she will be ready to answer that line of anemic

4 cross. But I don't see how -- whether or not they hold a

5 particular position that bears -- well, there are so many

6 levels in which it is irrelevant. All it ever bears on, on its

7 best day, is whether the premium, if there was one, was

8 reasonably determined and necessary. You know our position,

9 which is that there was no premium, so this entire inquiry

10 about whether, if there were one, it would be reasonably

11 determined and necessary is irrelevant at this point.

12 But giving the devil its due, if it were relevant, if

13 it were relevant --

14 THE COURT: You are not calling Mr. Godfrey the devil

15 but --

16 MR. GODFREY: I'm not, not yet, your Honor.

17 MR. ROBBINS: It is a term of phrase.

18 It strikes me as bearing not at all on the purposes

19 for which this witness has been called. If they want to

20 inquire about Aurelius' positions, and the absence of evidence

21 about that, of Dr. Sabry, she is here, she is in court, she can

22 answer those questions, and she will. But for purposes of this

23 witness, and the matters on which he has been called, I don't

24 think there is anything relevant that that -- I don't think

25 that has become any more relevant today than it was back in

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1 February and, before that, in October, when your Honor ruled on

2 the exact set of issues.

3 THE COURT: All right. I guess my question is should

4 I not allow them to ask some questions on that so as to provide

5 a foundation for what I anticipate will be cross-examination of

6 Dr. Sabry, that the trading position of Aurelius, that if

7 Aurelius was indeed investing in credit default swaps as early

8 as, say, July or what have you, that that would affect the

9 pricing of the bonds and go to whether there was or wasn't a

10 premium or the exchange was for the equivalent amount, or

11 whatever the issue or argument is. I understand your argument

12 that ultimately it is all irrelevant because they have conceded

13 that there was no premium, and you may well be right about

14 that. My inclination is to make a record, a comprehensive

15 record, and then I will decide all those things in due course.

16 But why not let them at least inquire briefly of that, and then

17 they can inquire of Dr. Sabry with respect to whether that

18 makes any difference to her analysis, and then I can decide

19 whether they have waived it altogether, or what is your view on

20 that?

21 MR. ROBBINS: I guess my feeling is this, your Honor.

22 First and foremost, that isn't why they want to do this stuff.

23 They want to do this for the same reason they were trying to

24 get it in discovery, which is this belief that some combination

25 of unclean hands or bad motive or intent somehow affects

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1 whether or not there was a breach. The Court held, correctly,

2 that whether or not there is a breach turns entirely on what

3 Windstream did, not on the thoughts and intents of the

4 plaintiff. That remains every bit as true today.

5 So then the question is, well, what does Dr. Sabry's

6 expert opinion, does that change the calculus? And I think the

7 answer is, no, it doesn't. Because, among other things,

8 Dr. Sabry is prepared to answer as if in fact -- on the premise

9 that Aurelius does own CDS positions, and she can answer that

10 question. In other words, there is no need to inquire of this

11 witness solely to provide a foundation to ask questions of

12 Dr. Sabry. She is prepared to answer those questions. And

13 whether or not whatever the truth of the CDS position is or

14 isn't doesn't change the fact that her opinion did not take

15 account of that.

16 And they are welcome to inquire. You know, if I were

17 to tell you, if we could prove -- if 50 bishops swore that

18 Aurelius held a CDS position, wouldn't that be important to

19 your opinion? Wouldn't you want to know that? Wouldn't it

20 change your advice? And they are welcome to answer those

21 questions and see what answers they get. But I don't think it

22 renders this witness' answers any more relevant than they were

23 in February of this year and October of the year before.

24 THE COURT: All right. Thank you.

25 Mr. Godfrey, let's take these in order. First, on the

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1 privilege issues.

2 MR. GODFREY: I have no intention of inquiring about

3 attorney-client privileged information. And to the extent the

4 witness or counsel feels that the witness might be disclosing

5 same, I will defer to their judgment.

6 THE COURT: All right. I would ask, to the extent

7 that you veer anywhere close to that territory, that you can

8 make clear that your question, you are not asking for him to

9 divulge confidential communications with counsel.

10 MR. GODFREY: I was prepared to begin by saying,

11 Mr. Prieto, I am not asking about nor would I ask you to

12 disclose to me any attorney-client privileged communications.

13 So if you have any doubt about that, raise your hand and I'll

14 either move on or rephrase or Mr. Robbins and you can confer.

15 How is that?

16 THE COURT: Very good. Thank you.

17 Number two is -- well, actually, let's skip to three.

18 Settlement discussions, tell me whether you intend to

19 go there and why it would be permissible under Rule 408.

20 MR. GODFREY: I do not intend to inquire about any

21 Rule 408 overtures that have been made by Aurelius to

22 Windstream Services. There are three documents -- Windstream

23 Exhibit 155, 156 and 157 -- that were drafted by Aurelius,

24 probably, in Mr. Robbins' words, heavily lawyered, sent to

25 other noteholders, in which Aurelius, it appears at least to

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1 the objective reader, is seeking to solicit some kind of

2 special deal. I leave the Court to determine whether or not

3 that is true. But those documents are in evidence, and I think

4 that they are more than fair game.

5 But in terms of Aurelius' approaches over time to

6 Windstream Services after its issuance of a notice of default,

7 I have no intention of inquiring about any of those documents,

8 although in two instances I thought they were fair game but I

9 thought it was more trouble than it was worth so I decline to

10 go into those.

11 THE COURT: I will take up those objections, if they

12 are made, during cross. But certainly looking at 155 to 157,

13 they seem to be addressed to prospective noteholders and,

14 therefore, I would think don't fall within Rule 408. So --

15 MR. GODFREY: I don't see how they could be, but I

16 will be interested to hear the argument if Mr. Robbins chooses

17 to make it.

18 THE COURT: It may be an anemic one.

19 MR. GODFREY: Funny thing about anemia, it is often

20 misdiagnosed. Sometimes it is confused with steroids.

21 THE COURT: All right. Enough with that.

22 The last issue is the trading positions issue. Tell

23 me, number one, why, to the extent that you are now arguing

24 that that is relevant to the valuation of the notes and the

25 exchange premium, or lack thereof, you didn't waive that by not

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1 making that argument back in October or, more relevant,

2 February, when I think it would have been at issue. And,

3 number two, why, given Mr. Robbins' representations that

4 Dr. Sabry, that you compose whatever hypotheticals you want,

5 and mindful that she wasn't given the trading positions and

6 trading history herself, why it's relevant?

7 MR. GODFREY: Sure. Three reasons: One, things

8 changed. Most recently, they changed this morning.

9 Mr. Robbins opened the door -- in fact, he didn't just open the

10 door, he blew the hinges off the door. He asked the witness,

11 "Isn't it true, sir, that noteholders rely upon the covenants

12 at the time they purchase the notes?" He put at issue the

13 reasons for why people or institutions purchase the notes. He

14 had a number of questions about reliance.

15 We all know in this room that Aurelius did not rely

16 upon any of the covenants in the indentures. In fact, they

17 continued to purchase notes, it is undisputed on this record,

18 after it had sent the September 21st notice of defaults. So

19 regardless of the Court's rulings up until now, Mr. Robbins

20 opened the door wide open, and I am entitled, I think, to ask

21 Aurelius the purpose for which they -- the reason for why they

22 purchased the notes.

23 Secondly --

24 THE COURT: I find that unpersuasive. What is your

25 second argument?

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1 MR. GODFREY: With respect to Global Bond Services,

2 they're making an argument -- spent a lot of time on it -- that

3 there was a failure by Global Bond Services to circulate to

4 noteholders the second supplemental memorandum.

5 THE COURT: That's a stipulation --

6 MR. GODFREY: No. But he is making an argument that

7 that somehow avoids the second supplemental memorandum. I am

8 entitled, I think, to ask whether in fact Aurelius ever

9 participated in the exchange and every purchased or exchanged

10 the notes subject to that, because if they did not, they lack

11 standing. No other noteholders complained about it, and

12 they're complaining about something that they have no standing

13 to complain about.

14 THE COURT: I'm not sure I follow. I certainly think

15 you can ask about whether they knew of the second supplemental

16 exchange.

17 MR. GODFREY: Am I entitled to ask whether they

18 purchased notes and exchanged under it?

19 THE COURT: Spell out for me what the argument is for

20 the --

21 MR. GODFREY: Well, it is twofold, two parts to the

22 argument. One is that if they didn't, they lack standing to

23 complain about it would be our argument. And the second part

24 is if in fact they participated in the exchange, then we think

25 that that shows that they thought the exchange was worthwhile

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1 to participate in and that they are hedging their bets and

2 applying a sophisticated trading game that we know they are

3 playing.

4 THE COURT: All right. But that, just to be clear,

5 would open the door to inquiry regarding trades and investments

6 in the exchange offer time period --

7 MR. GODFREY: Correct.

8 THE COURT: -- over November.

9 MR. GODFREY: That is what we are talking about.

10 THE COURT: OK.

11 MR. GODFREY: I am not talking about -- I've got your

12 Honor's last five minutes successful persuading your Honor

13 about the pre-August 3rd trading history, I've got that, so

14 we're stalking about post-August 3rd trading history, which, by

15 the way, he lays out in his affidavit and it is laid out in the

16 various documents when they purchased various notes, etc.

17 THE COURT: All right. And your third argument?

18 MR. GODFREY: Dr. Sabry, she asked for the same

19 information in order to form her opinions. We have an

20 artificial construct here. The artificial construct is she

21 gives opinions about no impact on CDS, no one in the market

22 knew, etc., etc., except for we believe -- and Dr. Kan is going

23 to show this -- we believe that the largest single purchasers

24 of notes causing peaks on this chart -- I think it is chart

25 five -- and peaks, red peaks, was Aurelius. Dr. Sabry

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1 discounts all of that, just pretends it doesn't exist. In a

2 but-for world that one is analyzing, one does not have the

3 luxury of ignoring the actual data and just making it up.

4 THE COURT: All right. So --

5 MR. GODFREY: That is a Sabry issue as much as it is

6 an Aurelius witness issue.

7 THE COURT: Understood. I don't think you need the

8 actual trading history in July or August to cross-examine

9 Dr. Sabry on that point. I will leave it to me to decide later

10 whether that is anemic or not anemic cross.

11 But I am persuaded by your second point that some

12 inquiry with respect to trades or transactions in the

13 October/November time period may be relevant here and that the

14 door has been opened to that based on the questions and

15 arguments being made with respect to the global bondholder

16 services' issue and the second offering memorandum. So, I will

17 allow you to inquire with respect to that time period, but my

18 ruling with respect to earlier stands.

19 MR. GODFREY: I understand. One more point just for

20 the Court.

21 THE COURT: All right.

22 MR. GODFREY: I did not have an opportunity to say

23 this last week but I am going to say it now.

24 This notion that Aurelius is not claiming that a

25 premium was paid is contrary to the only counterclaims they

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1 have on file. The counter claims they have on file, because I

2 am going to get into this with Mr. Prieto, are that a premium

3 was paid but it was an unreasonably determined and unnecessary

4 premium. It was never that no premium was played. And what

5 has taken place here is subsilencio they are seeking to amend

6 their complaint long after the pleadings are due and reverse

7 course, and I will get into that with the witness on the

8 witness stand.

9 Thank you, your Honor.

10 THE COURT: All right. Well, to the extent that it is

11 appropriate to inquire of the witness on that, you may, but it

12 sounds like it may well be legal argument for me.

13 Yes.

14 MR. ROBBINS: Just very briefly, your Honor, with

15 respect to the settlement line of questions, the Court ruled --

16 and obviously I don't quarrel with it -- that Rule 408

17 obviously has a role -- important role to play. Mr. Godfrey

18 said, well, yeah, but I am going to stay away from 408 uses of

19 settlement material. That's why I wanted to stand up again.

20 The parties exchanged emails. I have copies here. They are

21 not marked as exhibits, but this isn't just lawyer chitchat.

22 But I've got copies for Mr. Godfrey --

23 THE COURT: Does this pertain to Exhibits 155, 156 and

24 157?

25 MR. ROBBINS: Yes. What it says -- well, in the

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1 following sense: The parties agreed that settlement

2 discussions would be subject to a broader privilege than 408.

3 In particular, per an Arthur Aufses email that is part of an

4 email chain -- I have copies for the Court -- it basically said

5 that settlement communications between the principals will be

6 protected by an agreement not just that the discussions are

7 protected by Federal Rule 408 and all state equivalents but

8 that nothing that the principals say to each other in the

9 course of the negotiations will be used in court for any

10 purpose. Mr. Hessler, on behalf of Kirkland & Ellis, agreed to

11 that.

12 So, the notion that Rule 408 sets the boundaries here

13 I think is not accurate. I think the parties agreed to the

14 broadest protection against settlement conversations that they

15 could and those should be honored.

16 THE COURT: OK. But I guess my question -- I took

17 Mr. Godfrey to be representing that he was steering clear of

18 stuff that triggered your concern most unanemicly and was

19 planning to inquire with respect to these three exhibits that I

20 just referenced. Those seem to be communications to fellow

21 noteholders, not to Windstream, and, therefore, presumably

22 wouldn't fall within the scope of settlement discussions

23 whether under Rule 408 or that stipulation.

24 MR. ROBBINS: I have no quarrel with that at all.

25 What I took Mr. Godfrey to be saying is because

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1 those -- because there is a reference to possible settlement in

2 letters to bondholders, that somehow opens the door to

3 inquiries about what settlements Mr. Prieto or his firm may

4 have had in mind, and so long as he doesn't trespass the limits

5 of 408, he is good to go. And I think that's not true. And he

6 is welcome to ask, you know, does this letter say what it says,

7 fine. But I don't think that's where we are going to end up.

8 I think there is going to be questions like, well,

9 what settlements did you have in mind, Mr. Prieto, what were

10 you thinking, what did you propose, what did you tell your

11 counterpart at Windstream. That's where is I think they're

12 going to go. I hope I'm wrong, but I suspect not, because what

13 I heard as an answer was I won't trespass Rule 408. And all I

14 wanted to let the Court know is the parties agreed to nonuse of

15 settlement chatter, and that's where we are.

16 THE COURT: All right. Well, I would say, if anyone

17 at the back table wants to -- has a quarrel with your

18 representation regarding the parties' agreement, I will hear

19 that. Otherwise, I think it is best to just leave this and see

20 where it goes. You have done, to use a favorite phrase of

21 Mr. Godfrey himself, you've laid down your marker and he has

22 heard you and I have heard you, so I will be attuned to it, but

23 it seems to me it will depend heavily on what questions are

24 asked and I can --

25 MR. ROBBINS: Of course.

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1 THE COURT: -- rule as it comes.

2 MR. ROBBINS: OK.

3 MR. GODFREY: Not to lay down another marker: I do

4 not intend to contravene what Mr. Hessler wrote, but I suspect

5 Mr. Robbins wants the broadness far beyond that and we will

6 have to wait and see how that develops.

7 THE COURT: All right. Well, I will wait and see as

8 well.

9 All right. Anything else that we need to discuss in

10 the absence of Mr. Prieto?

11 MR. GODFREY: No. Thank you, your Honor, for your

12 time.

13 MR. ROBBINS: No. Thank you for hearing us, your

14 Honor.

15 THE COURT: All right. So will somebody tell him that

16 he is allowed to come back.

17 (Pause)

18 Mr. Prieto, if you want to step up to the witness

19 stand, please.

20 THE WITNESS: Yes, your Honor.

21 THE COURT: This time I will remember to swear you.

22 DENNIS PRIETO,

23 called as a witness by Aurelius,

24 having been duly sworn, testified as follows:

25 THE COURT: All right. You may be seated, please.

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1 And would you please state and spell your name for the

2 record.

3 THE WITNESS: It's Dennis Prieto. That's D-e-n-n-i-s

4 and the last name is P-r-i-e-t-o.

5 THE COURT: All right. Mr. Robbins, you may proceed.

6 MR. ROBBINS: Thank you, your Honor.

7 DIRECT EXAMINATION

8 BY MR. ROBBINS:

9 Q. Mr. Prieto, I believe you have in front of you a notebook

10 that contains, among other things, your affidavit prepared and

11 submitted in this case. May I ask you to take a look at that

12 notebook and in particular at Tab 1, where I believe you will

13 find AX318, for identification.

14 A. Yes, I see it.

15 Q. And do you recognize that document?

16 A. I do.

17 Q. What do you recognize it to be?

18 A. It is my affidavit.

19 Q. On page 4 of that affidavit, is that your signature?

20 A. Yes.

21 Q. And have you had occasion to review it in anticipation of

22 your testimony today?

23 A. I have.

24 Q. Are there any changes to the affidavit that you wish to

25 make?

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1 A. I noticed that there was a typo in paragraph 3.

2 Q. What typo is that, do you recall?

3 A. Yes. The reference to AX298, it should instead be a

4 reference to AX299.

5 Q. OK. Other than that, any other changes you wish to make?

6 A. No.

7 Q. With that one change in mind, is the affidavit true and

8 accurate?

9 A. Yes.

10 Q. And do you swear to all the paragraphs contained in your

11 affidavit?

12 A. Yes.

13 MR. ROBBINS: At this time, your Honor, I offer AX318

14 as the direct testimony of Dennis Prieto, and I pass the

15 witness for cross-examination.

16 THE COURT: All right. There was one objection filed.

17 That objection is sustained in part, overruled in part. It was

18 with respect to paragraph 5. And I will strike, that is,

19 sustain the objection to the first portion of the first

20 sentence of that paragraph. That is from the words "The

21 Trustee" through "notice of default and." That language is

22 stricken. It will begin -- and you will have to imagine it's a

23 capital T -- with the "Trustee ultimately brought this action,"

24 period. So that part remains but the first part of that

25 sentence is stricken.

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1 Any objection to the one correction, Mr. Godfrey? I

2 assume it provides you a whole lot of cross.

3 MR. GODFREY: I almost don't know what to do, your

4 Honor. No, no objection.

5 THE COURT: All right. Very good. So with that one

6 ruling, AX318 is admitted and we'll proceed to

7 cross-examination.

8 (Defendant Aurelius Exhibit AX 318 received in

9 evidence)

10 MR. GODFREY: We'll need a minute, your Honor. We are

11 passing up some books. We don't seem to have enough books in

12 the courtroom so I am going to add some more.

13 THE COURT: All right.

14 MR. GODFREY: I know I'm on the clock. I just need a

15 minute to get oriented here.

16 CROSS-EXAMINATION

17 BY MR. GODFREY:

18 Q. Good afternoon, Mr. Prieto.

19 A. Good afternoon.

20 Q. Could you turn, please, to paragraph 10 and paragraph 11 of

21 your affidavit, which has been marked and entered into evidence

22 as your direct testimony as AX318?

23 A. I am there.

24 Q. And in paragraph 10, you explain that Aurelius received

25 various documents issued to bondholders in connection with the

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1 November transaction, correct?

2 A. Correct.

3 Q. And you received them by or via means of Global Bond

4 Services, is that correct?

5 A. Yes.

6 Q. Now, Global Bond Services actually sent the documents, sent

7 the original exchange offer, the first supplemental

8 Indenture -- the first supplemental offering memo and the

9 second to the Depository Trust Corporation; is that your

10 understanding?

11 A. Sorry. Could you repeat the question?

12 Q. Sure. Windstream Services actually sent the original

13 October 18th exchange offers and then the first supplemental

14 offering memorandum and the second supplemental offering

15 memorandum to Depository Trust corporation; is that your

16 understanding?

17 A. Based on what I've seen in this litigation, yes.

18 Q. And then Depository Trust Corporation was supposed to via

19 Global Bond Services circulate them to the various noteholders;

20 is that your understanding?

21 MR. ROBBINS: Objection. Fact not in evidence and

22 that's not true.

23 MR. GODFREY: Let me rephrase the question.

24 BY MR. GODFREY:

25 Q. You got the original offering memorandum, right, that is,

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1 you, Aurelius?

2 A. Yes.

3 Q. You got the first supplemental memorandum?

4 A. Yes.

5 Q. But say you did not get the second supplemental memorandum,

6 right?

7 A. Correct.

8 Q. Now, looking at paragraph 11 of your affidavit, it says,

9 "Prior to the expiration of the exchange offers on November 16,

10 2017, Aurelius was not aware of any waivers, amendments, or

11 modifications to the terms or conditions of the November

12 transaction, except for those that were announced in press

13 releases issued by Windstream."

14 Do you see that?

15 A. Yes.

16 Q. Now, you read press releases when they came out, correct,

17 from Windstream?

18 A. I did or my analysts did.

19 Q. Turn in our binder to Tab 22, AX188, please.

20 MR. GODFREY: Mr. Hehn, could you put that up, please.

21 Q. This is a press release dated November 1, 2017, marked

22 AX188. Do you have that?

23 A. I do.

24 Q. Did you review or receive this press release on or about

25 November 1, 2017, at the time it was issued by Windstream?

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1 A. I'm sure Aurelius received it. I don't recall specifically

2 whether or not I reviewed it.

3 Q. Do you think somebody at Aurelius reviewed this?

4 A. Yes.

5 Q. And so in the third full paragraph down, the biggest one on

6 the page -- if you can enlarge that, Mr. Hehn, please -- and it

7 says, in the second full sentence, "The company is revising the

8 terms of the 2020-2023 notes consent solicitations." Do you

9 see that?

10 A. Yes.

11 Q. Were you aware of that at that time?

12 A. I don't recall.

13 Q. At any time when you saw these various press releases

14 announcing exchanges either to the consent solicitations or to

15 the offering memorandum, did anyone at Aurelius pick up the

16 phone and call anyone at either Depository Trust Corporation or

17 at Windstream to ask questions about the exchanges that were

18 being made?

19 A. I don't believe so.

20 Q. You engage in due diligence in your job, correct?

21 A. I do.

22 Q. You follow the markets very carefully, do you not?

23 A. Yes.

24 Q. In fact, when you have a serious investment like the

25 investment Aurelius made into these particular notes, you were

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1 paying 110 percent attention all the time on what was taking

2 place with those notes, were you not?

3 A. Well, there were many facets to the investment so there was

4 a bit of a divide and conqueror at the firm, but generally that

5 was the intention.

6 Q. Aurelius certainly was paying as close attention as humanly

7 possible to anything and everything that was affecting the

8 August 2023 notes during this time period, that is, October 18,

9 2017 through November the 7th, 2017; is that a fair statement?

10 A. We certainly tried to.

11 Q. And at no point during that time did you pick up the phone

12 or send an email or send a letter to Windstream Services asking

13 any questions about or asking for any clarifications about or

14 asking any additional information about the exchange offer, any

15 amendments, any revisions; correct, sir?

16 A. I don't recall specifically. I don't think so but I don't

17 recall.

18 Q. So my statement is correct, you never did it, Aurelius

19 never did it, right? They never once picked up the phone,

20 wrote a letter to ask questions to Windstream Services, right?

21 A. I said I don't recall doing so.

22 Q. Thank you. Now, at any time -- and I'm going to try to

23 stay within your Honor's guidance here -- at any time from

24 October the 18th, two-thousand -- strike that.

25 At any time from August 3, 2017 through the end of the

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1 month of November of 2017, did Aurelius own a 2020 or a 2021 or

2 a 2022 note of Windstream Services?

3 A. Yes.

4 Q. OK. Did you own those notes during the exchange period,

5 that is, from October 18, 2017, to November the 7th, 2017?

6 A. Yes.

7 THE COURT: Can I just clarify? Did you own each of

8 those series, the 2020, 2021 and 2022, or they were lumped

9 together? So, I just want to be precise.

10 THE WITNESS: I believe we had a nominal ownership

11 interest in all the series, the 2000 bonds or so.

12 THE COURT: All right. So you believe you had at

13 lease a nominal interest in each of those three?

14 THE WITNESS: Yes.

15 THE COURT: OK. And that's between August 3rd and the

16 end of November?

17 THE WITNESS: Yes.

18 THE COURT: At all times during that period?

19 THE WITNESS: I think so but, again, it was such a

20 nominal position, I -- it wasn't something I tracked daily.

21 BY MR. GODFREY:

22 Q. Did you also own April 2023 notes, that is, you, Aurelius,

23 from August 3rd through the end of 2017 during that time

24 period?

25 A. I believe we also had a nominal position in those.

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1 Q. OK. Now, for those nominal positions, did you at Aurelius

2 ever write or contact or email anyone at Windstream asking for

3 clarification, asking for further information, asking for what

4 did Windstream mean when it issued these press releases about

5 amendments to the supplemental Indenture -- supplemental

6 offering memos?

7 MR. ROBBINS: Objection to the form. That was a lot

8 of questions.

9 THE COURT: Sustained.

10 MR. GODFREY: I can break it up.

11 THE COURT: Wasn't it asked and answered?

12 MR. GODFREY: No. I asked before about the August --

13 you know what, your Honor, I think -- let me rephrase it one

14 more time.

15 BY MR. GODFREY:

16 Q. With respect to the April 2023 notes, did you ever ask any

17 questions of Windstream about the exchanges or the amendments

18 to the offering memorandum?

19 A. I don't have any recollection of doing so.

20 Q. OK. Do you agree, sir, that the consent condition was

21 waivable by Services? Would you agree with that?

22 MR. ROBBINS: Objection. It calls for a legal

23 conclusion from a nonlawyer.

24 THE COURT: Sustained.

25 BY MR. GODFREY:

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1 Q. Did you have any understanding about that issue, sir,

2 whether or not it was waivable? Just your understanding. I am

3 not asking for whether you have a legal opinion about it.

4 MR. ROBBINS: Just for the record, I ask the witness

5 to exclude from that answer any information he has from his

6 lawyers.

7 THE COURT: Well, you should exclude from that any

8 communications that you had with your lawyers, but you can

9 answer what your own understanding is. Whether you will then

10 be asked the source of that understanding, I am assuming --

11 MR. GODFREY: He will not be asked the source of that

12 understanding, your Honor.

13 THE COURT: All right. You may proceed.

14 A. I don't recall.

15 BY MR. GODFREY:

16 Q. Thank you. We are going to change topics now, Mr. Prieto.

17 And I apologize, I meant to mention something to you at the

18 start of the cross-examination. Mr. Robbins and I have an

19 agreement among counsel that if I ask you a question that you

20 believe is going to necessitate your imparting attorney-client

21 privileged information or discussions, you are not to answer

22 that question. You are to say, Mr. Godfrey, I can't answer

23 that question unless -- without violating attorney-client

24 privilege.

25 So, do we have that understanding, you and I?

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1 A. I understand.

2 Q. OK. I should have mentioned it at the start and if I

3 venture into that, it will be by accident, I assure you.

4 Let's change topics.

5 Have you reviewed the pleadings that have been filed

6 in this case?

7 A. Yes.

8 Q. And do you personally review the pleadings that Aurelius

9 files to ensure their accuracy?

10 A. Yes.

11 Q. And so if Aurelius through its counsel files a pleading,

12 that is something that you and Aurelius believe is the truth,

13 right?

14 A. Well, as informed by discussions with counsel.

15 Q. OK. So let's take a look at Windstream Exhibit 178, which

16 is not in evidence but which has been marked for purposes of

17 identification.

18 You have seen this as the counterclaims that Aurelius

19 has filed in this litigation, have you not, sir?

20 A. Yes.

21 Q. Have you authorized these counterclaims to be amended or

22 dropped in this litigation?

23 A. Sorry. Can you repeat the question?

24 Q. Certainly. Have you authorized any of the counterclaims

25 that Aurelius has brought in this litigation to be amended or

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1 dropped?

2 A. I've discussed those issues with counsel.

3 Q. Have any counterclaims been dropped, to your knowledge,

4 that Aurelius has brought as reflected in Windstream Exhibit

5 178?

6 A. I don't recall.

7 Q. You don't know one way or the other. All right, then we'll

8 move on.

9 Let's take a look at -- you have before you, sir, a

10 copy of the Indenture.

11 You are familiar with the Indenture, are you not, sir?

12 A. Yes.

13 Q. Can you turn to, in the Indenture, Section 409(a), please.

14 THE WITNESS: Do you have a copy for me?

15 THE COURT: Windstream Exhibit 1 I think is --

16 MR. GODFREY: Yes.

17 Q. That's the "Incurrence of Indebtedness" Indenture, correct?

18 A. That's what Section 409 is.

19 Q. You've seen that before, right?

20 THE COURT: On page 59.

21 A. Yes, I've seen that.

22 Q. Is it Aurelius' contention in this lawsuit that Windstream

23 Services has not complied with Section 4.09(a) because,

24 allegedly, there has been a violation of Section 4.19 that is a

25 sale and leaseback transaction in connection with a 2015 spin

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1 transaction?

2 A. Yes.

3 Q. But you also agree, do you not, that unless the Court finds

4 a violation of the sale and leaseback provision of Section

5 4.19, then Windstream Services is not in violation of Section

6 4.09(a), correct?

7 A. I am not a lawyer but --

8 MR. ROBBINS: You've got to exclude from that answer

9 anything you've gotten from lawyers. If you have an

10 independent view as a nonlawyer, you can provide it.

11 A. I'm not a lawyer but I believe that is accurate.

12 Q. In fact, let me hand you, sir -- it is not in the binder --

13 I give counsel Exhibit 168, a copy for the Court and one for

14 you.

15 MR. GODFREY: May I approach, your Honor?

16 THE COURT: You may.

17 MR. GODFREY: Thank you.

18 Mr. Hehn, 168, page 5, request number 7.

19 MR. HEHN: Windstream?

20 MR. GODFREY: Windstream, yes. Thank you.

21 Q. Did you review, by the way, Mr. Prieto, the Aurelius

22 responses to requests for admission that were served by

23 Windstream Services?

24 A. Yes.

25 Q. So if we look at Request No. 7, it says: "Assuming that

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1 the 2015 transaction did not constitute a sale and leaseback

2 transaction as defined in the Indenture, admit that the company

3 had sufficient debt capacity under Section 4.09 to issue the

4 new notes." Do you see that?

5 A. Yes.

6 Q. And what was Aurelius' answer to the request for admission?

7 A. "Admitted."

8 Q. And is it correct, sir, that in the event there is no

9 violation of Section 4.09(a), then one never has to reach the

10 question of Section 4.09(b)?

11 A. That's what the answer to the request says.

12 Q. Thank you. I am going to shift topics again, then.

13 When did you -- not Aurelius, but you personally --

14 become aware of the October 18, 2017 consent solicitations and

15 exchange offers of Windstream Services?

16 A. I believe it would have been on October 18, 2017.

17 Q. Because you were watching everything Windstream very

18 carefully, and the moment they were announced, you were aware

19 of the exchange offers and consent solicitations on October 18,

20 2017, is that right?

21 A. Yes.

22 Q. And when you became aware of those on October the 18th,

23 that was -- strike that.

24 On October the 18th, when you became aware of the

25 consent solicitations and exchange offers of Windstream

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1 Services, did you understand immediately that, if successful,

2 the default notice issued by Aurelius on September the 21st,

3 2017, would no longer have effect?

4 A. Well, I don't know if it was immediate because the

5 documents are pretty voluminous but it became quickly apparent.

6 Q. Within a day or so, is that fair?

7 A. Yes.

8 Q. And did you also understand within a day or so of October

9 the 18th, 2017, that if the exchange offers and consent

10 solicitations were effective, that Aurelius would have less

11 than 50 percent ownership of the total August 2023 6-3/8 notes?

12 A. Yes. We understood that if it was successful, we would

13 have less than 50 percent of the new notes plus the old notes.

14 Q. OK. And given that understanding, did you file an

15 injunction seeking to preserve the status quo in this court so

16 that those exchange offers and consent solicitations couldn't

17 take effect?

18 A. No.

19 Q. Did you choose to send in any letters or notices to other

20 bondholders arguing that they should not agree to the exchange

21 offers and consent solicitations?

22 A. We sent some letters to bondholders, but I don't recall

23 arguing that they should not participate in the transaction.

24 Q. Let's see what you said. Let's turn to Tab 14 of the white

25 binder, Exhibit 156.

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1 If you are looking, just to give you a preview, Tab

2 13, 14 and 15, Windstream Exhibits 155, 156 and 157. So let's

3 start with Tab 14, please.

4 Have you seen Tab 14, which is Windstream Exhibit 156,

5 before, sir?

6 A. Yes.

7 Q. Did you personally participate in writing this? I don't

8 want to know if your counsel did, but did you personally

9 participate in writing this?

10 A. I was not the author of this letter.

11 Q. Did you review the letter before it was sent out?

12 A. I don't completely recall but it wouldn't surprise me if I

13 did.

14 Q. Someone at Aurelius wrote this and someone at Aurelius

15 authorized this letter, Windstream Exhibit 156, to be sent out

16 to fellow Windstream noteholders, right?

17 A. Yes.

18 Q. And who were the fellow Windstream noteholders that you

19 sent -- that you, Aurelius, sent this letter, dated October the

20 24th, 2017, out to?

21 A. Well, if my recollection is correct, I don't think that the

22 letter -- I don't think that Aurelius sent the letter directly

23 to any bondholders.

24 Q. To whom was this letter sent? It is addressed "To fellow

25 Windstream noteholders," but who was it sent to?

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1 A. We disseminated the letter in publications that the

2 Windstream bondholders typically read.

3 Q. And your expectation was that other fellow Windstream

4 noteholders would read this letter, that is, Windstream Exhibit

5 156, dated October the 24th, 2017?

6 A. Yes.

7 Q. And in this letter, among other things, you tell the other

8 fellow Windstream noteholders that the pending transaction --

9 let's -- if you can go down, Mr. Hehn, I will make this easier.

10 Fourth paragraph down, Mr. Hehn, please. If you can enlarge

11 that.

12 What did Aurelius tell the fellow -- its fellow

13 Windstream noteholders in the last sentence of the October 24,

14 2017 letter, Windstream Exhibit 156?

15 A. Are you asking me to read the last sentence?

16 Q. Yes. I would like you to read what Aurelius told its

17 fellow Windstream noteholders.

18 A. "The pending transaction is highly inefficient, its

19 conditions are unlikely to be satisfied, it has serious legal

20 infirmities, and it misses a potential opportunity for

21 Windstream to extract value for itself from Uniti."

22 Q. And so your position is Aurelius -- and what you told

23 fellow noteholders on October the 24th, 2017 -- was that the

24 exchange offer and consent solicitations had serious legal

25 infirmities, right?

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1 A. Yes.

2 MR. GODFREY: Do we need to stop a minute for a court

3 reporter switch off?

4 THE COURT: I don't think so.

5 MR. GODFREY: I wasn't sure.

6 THE COURT: They usually do it seamlessly.

7 MR. GODFREY: Usually but I was caught off guard

8 there. I apologize, your Honor.

9 Q. Let's take a look, then, at -- go to Tab 13, which is an

10 October 30, 2017 letter, from Aurelius to fellow Windstream

11 noteholders. Do you have that, sir?

12 A. Yes.

13 Q. Did you review Windstream Exhibit 155 prior to its

14 issuance?

15 A. Yes.

16 (Continued on next page)

17

18

19

20

21

22

23

24

25

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1 Q. Did you write or participate in drafting the lease

2 Windstream Exhibit 155?

3 A. I wasn't the main author, but I believe I had more

4 involvement than this one.

5 Q. How would you characterize --

6 A. Sorry. Could I step back? Actually, no, I was not -- I

7 didn't author this one.

8 Q. But you are aware that Aurelius was sending out Exhibit 155

9 on October 30th.

10 A. Yes.

11 Q. How would you characterize this note to other Windstream

12 noteholders? Well, how would you characterize it as an

13 Aurelius representative here in court?

14 A. I'm not sure what you mean.

15 Q. What was the message you were trying to convey to the

16 fellow Windstream noteholders that you felt so important to put

17 it into a note that you sent out?

18 A. Well, the subject matter of the letter is informing

19 Windstream bondholders of our view that we thought that the new

20 notes that were being issued in the exchange offer would have

21 OID for bankruptcy purposes.

22 Q. Could you go to the last page, sir, page 4.

23 THE COURT: What do you mean by "OID"?

24 THE WITNESS: Original issued discount.

25 Q. Last paragraph on page 4.

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1 MR. GODFREY: Could we enlarge that please, Mr. Rehn.

2 Q. Again, Aurelius in this letter or note of October 30 told

3 fellow Windstream noteholders that "we do not believe it will

4 be legally efficacious, even if noteholders are imprudent

5 enough to take new notes in the exchange." That's what you

6 told, you, Aurelius, told other noteholders on October 30,

7 2017. Correct?

8 A. Yes.

9 Q. Now, there are 12 days between the 18th of October and the

10 30th of October of 2017. At any time during that 12-day

11 period, did you direct or authorize your counsel to come into

12 court to seek a TRO or other equitable relief to stop the

13 consummation of the first exchange offers for the consent

14 solicitations?

15 MR. ROBBINS: That sounds like it calls for a

16 communication from client to counsel. But I think there may be

17 a non -- a way of formulating that question that would not do

18 so.

19 THE COURT: The broader point is, I think I can take

20 notice of the docket and what and isn't on it. There obviously

21 was no motion for temporary relief or injunctive relief. I

22 think you can make that argument. You don't need to inquire of

23 Mr. Prieto. Go ahead.

24 Let's turn to WIN Exhibit 156. This is a letter, or

25 note, dated October 24, 2017, from Aurelius to fellow

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1 Windstream noteholders. Do you recognize this document, sir?

2 MR. GODFREY: I think it was already asked.

3 MR. ROBBINS: I'm sorry. We covered that.

4 MR. GODFREY: No. That's my fault.

5 THE COURT: I think you mean 157.

6 MR. GODFREY: I mean 157. I was just realizing that.

7 I was having that déjà vu all over again experience.

8 Q. 157, Mr. Prieto. November 1st. Do you recognize this

9 document?

10 A. Yes.

11 Q. Was this another document to noteholders sent by Aurelius

12 on November the 1st?

13 A. Either existing holders or prospective holders.

14 Q. Yes. OK. Now, what's interesting here -- look at the last

15 paragraph, please.

16 MR. GODFREY: Let's enlarge it, Mr. Ng.

17 Q. During this time period, did you give a direction to U.S.

18 Bank with respect to the authentication of these notes?

19 A. In around this time period, yes.

20 Q. And what did you direct U.S. Bank to do?

21 A. Well, in our initial direction letter to U.S. Bank, I

22 believe what we asked them to do was to seek a judicial

23 determination before authenticating the new notes.

24 Q. You asked U.S. Bank to file suit in court to seek a

25 judicial determination before they authenticated the notes. Is

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1 that it?

2 A. I don't know what forum the seeking of judicial

3 determination was taken.

4 Q. All right. And did U.S. Bank follow your direction, that

5 is, Aurelius's direction?

6 A. No.

7 Q. Let's take a look at that direction, sir. It's dated

8 November the 3rd, 2017, Windstream Exhibit 145.

9 THE COURT: Do you have a tab number?

10 MR. GODFREY: Yes. I apologize. It's tab no. 10.

11 Q. Have you seen Exhibit 145 before, sir?

12 A. Yes.

13 Q. Is Exhibit 145 dated November the 3rd, 2017, the direction

14 that Aurelius gave to U.S. bank not to authenticate the notes

15 until there's a judicial determination of their validity?

16 A. Yes.

17 MR. GODFREY: In fact, Mr. Hehn, if you go to the very

18 bottom of the first page, page 1 of Exhibit 145, just enlarge 1

19 and A there, please.

20 Q. Do you have that, Mr. Prieto?

21 A. Yes.

22 Q. That's part of the direction to U.S. Bank that you're

23 talking about, right?

24 A. That is part of it.

25 Q. OK. So U.S. Bank declined. Is that what you're telling

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1 us?

2 A. Yes.

3 Q. Did Aurelius simply accept the declination by U.S. Bank, or

4 did it do something else, after November the 3rd?

5 A. I don't recall.

6 Q. Well, sir, two days later, isn't it a fact that Aurelius

7 gave another direction to U.S. Bank saying, no, we mean it,

8 basically?

9 A. I don't recall.

10 Q. Turn to tab 11, please. Do you recognize this letter,

11 dated November the 5th, 2017?

12 A. Yes.

13 Q. And this was from -- on the letterhead of the Kramer Levin

14 Naftalis & Frankel law firm, correct?

15 A. Yes.

16 Q. And they were the lawyers for Aurelius; is that not the

17 case?

18 A. At that time yes.

19 Q. Yes. And this was their response on Aurelius's behalf to

20 U.S. Bank's declination of filing suit to stop the

21 authentication of the notes, right?

22 A. Sorry. I didn't catch the last part are your yes.

23 MR. GODFREY: Would you mind rereading it to him,

24 madam court reporter. Thank you.

25 (Record read)

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1 A. It appears to be so.

2 Q. Well, after November the 5th, 2017, do you recall when the

3 notes were authenticated by U.S. Bank?

4 A. I believe it was either November 6th or November 7th.

5 Q. Are you familiar with something called the third

6 supplemental indenture?

7 A. I'm aware of the document.

8 Q. We'll get to that in a minute. You're generally aware what

9 the third supplemental indenture is.

10 A. I haven't looked at it in a long time. But I'm aware that

11 there is a document called a third supplemental indenture.

12 Q. And you're aware, sir, it was signed in connection with the

13 consent solicitations.

14 A. Yes.

15 Q. Other than write three letters to fellow Windstream

16 noteholders, complaining about legal infirmities, and two

17 letters to U.S. Bank demanding and directing that it not

18 authenticate the new notes and sign the third supplemental

19 indenture, what else, if anything, did Aurelius do, from the

20 period October the 18th through November the 7th, 2018, in

21 connection with the exchange offers and consent solicitations?

22 A. I don't know that we did anything else.

23 Q. By the way, Aurelius has never sued U.S. Bank for failing

24 to follow its direction; is that correct, sir?

25 A. Correct.

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1 Q. Now, do you recall when the first time it was, the date,

2 that Aurelius sued Windstream, challenging the validity of the

3 consents, the consent solicitations, the exchange offer of

4 October the 18th? Do you recall the date?

5 A. No.

6 Q. If I told you it was November the 21st, 2017, would that

7 ring a bell?

8 A. I believe it was somewhere in the November time frame. I

9 don't have that date specifically in mind.

10 Q. Take a look at tab 9, please, Windstream Exhibit 116. Do

11 you recognize this document entitled "The Third Supplemental

12 Indenture," sir?

13 A. Yes.

14 Q. Have you read the third supplemental indenture before, sir?

15 A. At some point I did.

16 Q. When you read the third supplemental indenture, did you

17 understand that the third supplemental indenture waived the

18 defaults alleged in the September 21st, 2017 notice of default

19 sent by Aurelius to Windstream?

20 A. Well, I think that's what it purported to do subject to

21 challenges on the consensus issues.

22 Q. Well, subject to challenges by Aurelius, as of the date

23 that it closed, it waived the September 21st, 2017 default that

24 Aurelius had issued, correct?

25 A. I understand that to be Windstream's position.

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1 Q. Turn to tab 12, please. That's a document, Windstream

2 Exhibit 148 is a document dated November the 17th, 2017. Have

3 you seen this document before, sir?

4 A. Yes.

5 Q. Can you tell the Court what this document is.

6 A. It looks to be a direction and indemnity letter sent by

7 Aurelius to U.S. Bank.

8 Q. And what is it that you are directing U.S. Bank to do on

9 November the 17th, 2017?

10 A. I don't recall, but I can look at the document if you'd

11 like me to.

12 Q. Take a moment, please.

13 A. Exhibit B to the document contains several directions.

14 Would you like me to review each of them?

15 Q. I'd like you to be familiar enough to answer questions, so,

16 yes, if that's what it takes, please.

17 A. OK. I've read it.

18 Q. In Exhibit B, the specific directions are, you want the

19 trustee -- that is, U.S. Bank -- to pursue a new lawsuit

20 challenging the authentication and validity of the third

21 supplemental indenture. Correct?

22 A. I would quibble with something you said just because I

23 don't have the familiarity. You said commence a new lawsuit.

24 I --

25 Q. Well, let's enlarge the very first paragraph on page 11 and

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1 read it together.

2 MR. GODFREY: Mr. Hehn, page 11, please, first

3 paragraph enlarged.

4 Q. What was Aurelius's direction as set forth in the first

5 paragraph, Mr. Prieto?

6 A. "The trustee shall file and prosecute vigorously, either as

7 an amendment to the existing pleadings in the action titled

8 U.S. Bank National Association v. Windstream Services, LLC, or

9 as a new action in the United States District Court for the

10 Southern District of New York, to be filed as an action that is

11 related to the trustee action, a pleading, with the company as

12 the defendant, in which, by reasons of, including, without

13 limitation, the company's violation of the indenture in

14 connection with its consent solicitation of the holders of the

15 notes, its exchange offers for the issuance" --

16 Q. I think that's enough. I think we got what we need.

17 So from 29 days earlier, on October the 18th 2017, to

18 November the 17th, 2017, the sum total of what Aurelius did to

19 challenge the first exchange, the exchange offer, the consent

20 solicitation, the third supplemental indenture, and the new

21 notes was to send three directions to U.S. Bank as trustee and

22 to send three notes to fellow Windstream noteholders. Is that

23 right?

24 A. Again, I don't have a recollection of anything beyond that.

25 Q. Now, on October -- excuse me. On November the 21st,

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1 Aurelius filed its counterclaims, correct?

2 Do you recall that?

3 A. Again, I don't recall that specific date, but it was in the

4 November time frame.

5 Q. Let's pull up, Mr. Hehn, for a minute, please, 176,

6 Windstream Exhibit 176.

7 MR. GODFREY: Tab 17, Mr. Hehn.

8 Q. Do you have it before you, sir?

9 A. Yes.

10 Q. Did you review this document on or about the time it was

11 filed here in Judge Furman's court?

12 A. Yes.

13 Q. Now, as of the time that this claim was filed in this

14 court, had Aurelius issued a notice of default in connection

15 with the exchange offers and consent solicitations dated

16 October the 18th?

17 A. We had issued a notice of -- I believe we had issued a

18 notice of default related to portions of this litigation.

19 Q. Right, the September 21st notice of default.

20 A. Yes. Yes.

21 Q. I'm not asking you about the Section 4.19 notice of

22 default. I'm asking about, did you issue a notice of default

23 over Section 4.09, Section 4.12, or Section 4.17, which are the

24 subject of the counterclaims filed on November the 21st, 2017?

25 A. I don't recall.

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1 Q. Let's spend a minute on a new topic, then, talking about

2 remedies and what took place as a result of the consent

3 solicitation. As a result of the exchange offers and consent

4 solicitations, is it your understanding that $553 million in

5 new notes were issued to third-party noteholders?

6 A. The number sounds about right.

7 Q. And is it your understanding also that, in connection with

8 the exchange offers and consent solicitations of October 18,

9 2017, that closed on November the 6th, 2017, that approximately

10 half a billion dollars of old notes were exchanged and

11 canceled?

12 A. That also sounds about right.

13 Q. Is it also your understanding, sir, that, with respect to

14 the number of consents received that led to the third

15 supplemental indenture and that resulted from the exchange

16 offer and consent solicitations of October the 18th, 2017, that

17 a little more than 61 percent of all August 2023 noteholders

18 voted to consent?

19 A. That also sounds correct.

20 Q. Is it also your understanding, sir, that U.S. Bank as

21 trustee authenticated, in early November 2017, $553 million in

22 new August 2023 notes?

23 A. Again, I don't recall the specific amount, but they

24 authenticated somewhere in that ballpark, I believe, of new

25 notes.

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1 Q. Do you know when the August 2023 new notes started trading?

2 A. No.

3 Q. You assume they started trading within a few days of their

4 authentication.

5 A. That's a fair assumption.

6 Q. Is it a fair assumption that there have been millions upon

7 millions of dollars in August 2023 notes that have changed

8 hands since your authenticating last November?

9 A. I have no idea.

10 Q. Has Aurelius traded any August 2023 notes since November 7,

11 2023?

12 MR. ROBBINS: Objection, relevance.

13 THE COURT: Overruled.

14 A. I actually don't know.

15 Q. Don't know one way or the other?

16 A. No one way or the other.

17 Q. OK. Now, you're familiar with the indenture, correct?

18 A. Yes.

19 Q. Let's turn back to the indenture, please. It's Windstream

20 Exhibit 1. I think you have it before you. And can you please

21 turn to Section 2.02, which is in the indenture, page 29, but

22 it's page 36 in terms of the court exhibit number. Do you have

23 that before you, sir?

24 A. Almost. OK.

25 Q. You expect U.S. Bank to comply with Section 2.02, do you

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1 not?

2 A. My understanding of Section 2.02 is intertwined with my

3 discussions I've had with counsel regarding the indenture.

4 Q. Do you have an understanding that that U.S. Bank had the

5 authority to authenticate the new August 2023 notes under

6 Section 2.02?

7 I'm not asking for an understanding of it based upon

8 your conversations with counsel. But in reading this document

9 which you've told me you've read, do you personally have an

10 understanding that U.S. Bank was authorized to authenticate,

11 under Section 2.02 of the indenture?

12 A. Yes, I think that's right. The indenture says the trustee

13 shall authenticate the new notes once it receives an officer

14 certificate from the company.

15 Q. Take a look at the third paragraph, please.

16 MR. GODFREY: Could we enlarge that, Mr. Hehn.

17 Q. Do you see that, sir?

18 A. Yes.

19 Q. What does the second sentence of the third paragraph of

20 Section 2.02 in Windstream Exhibit 1 say?

21 A. "Such signature shall be conclusive evidence that the notes

22 have been authenticated under this indenture."

23 Q. Conclusive evidence as to the purchaser of the note, right?

24 A. I don't have a view on that.

25 Q. Do you have any understanding of what "conclusive evidence"

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1 means when the U.S. Bank as the trustee authenticates to

2 another purchaser?

3 A. No.

4 Q. No understanding.

5 A. No.

6 Q. OK. By the way, do you consider U.S. Bank to be not just a

7 trustee but a fiduciary, in terms of its obligations to

8 Aurelius?

9 MR. ROBBINS: That's got to be a legal conclusion,

10 your Honor.

11 THE COURT: Sustained.

12 MR. GODFREY: Well, if I might, your Honor, in

13 commercial circles, there's a fairly good understanding among

14 most business people of what fiduciary duties are. And I think

15 I'm entitled to ask him whether he considers U.S. Bank to be a

16 fiduciary.

17 THE COURT: With that understanding, I guess,

18 Mr. Prieto, the understanding that you are not being asked for

19 a legal conclusion as to whether U.S. Bank is or isn't a

20 fiduciary within the meaning of the law, is it your

21 understanding or view that they owe fiduciary duties to

22 Aurelius?

23 Is that the question?

24 MR. GODFREY: Yes.

25 THE WITNESS: I don't know, your Honor.

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1 Q. You don't know one way or the other.

2 A. Yes.

3 Q. Now, I don't want to get into politics -- this is not a

4 political question -- but I assume you've heard President Obama

5 make the famous statements several years ago that "Elections

6 have consequences," right?

7 A. Sounds familiar.

8 Q. Right. And so one of the consequences of this transaction

9 going forward was that half a billion in old notes were

10 canceled. Right?

11 A. Yes.

12 Q. And Aurelius wants to void the transaction and invalidate

13 the new notes. Correct?

14 MR. ROBBINS: Objection to what they want. That's a

15 legal conclusion, subject of our papers, and undoubtedly the

16 result of counsel communications.

17 THE COURT: Also of questionable relevance, so

18 sustained.

19 MR. GODFREY: Well, let me rephrase it.

20 Q. Would Aurelius ever buy or trade an invalidated note?

21 A. I don't know what you mean.

22 Q. A note which has been invalidated by a court. Would

23 Aurelius ever buy or trade a note which has been declared void

24 or invalid?

25 A. I never thought about that question. I would imagine it

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1 would depend on the circumstances.

2 Q. But you understand that there are third-party noteholders

3 that, in this litigation, Aurelius is asking the Court to void

4 or invalidate the notes?

5 MR. ROBBINS: Objection. That is not our position.

6 THE COURT: All right. Well, I'll allow the question

7 as to Mr. Prieto's understanding.

8 MR. GODFREY: I'll move on, your Honor. I think I can

9 argue this just myself.

10 THE COURT: Even better.

11 BY MR. GODFREY:

12 Q. Let's talk about something called the no action term of the

13 indenture. Are you familiar with that?

14 A. Yes.

15 Q. Now, when did Aurelius -- do you recall whether or not

16 Aurelius ever sent a notice of default in this case, for the

17 claims it's making, other than the September 21st, 2017 notice

18 of default?

19 A. Other than the September 21st notice, yes, I believe we did

20 at some point.

21 Q. Can you turn to tab 3 of your binder, please. Do you have

22 that, sir?

23 A. Yes.

24 Q. This is September 21st, '17 notice of default, right?

25 A. Yes.

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1 Q. And this notice of default was a notice complaining about

2 the alleged breach of Section 4.19, the sale of leaseback

3 provision of the indenture. Right?

4 A. Yes.

5 Q. Let's now turn to tab 4 in your binder, sir.

6 MR. GODFREY: This is Windstream Exhibit 71, Mr. Hehn,

7 please.

8 Q. This is dated November 27, 2017. Do you have that?

9 A. I do.

10 Q. What is this letter, sir?

11 A. This is a notice of default.

12 Q. For what topics?

13 A. Sir, for what?

14 Q. For what topics? What's the default that Aurelius is

15 claiming on November the 27th, 2017?

16 A. Well, the second page says that it is Aurelius's position

17 that the new notes cannot constitute additional notes, but then

18 it goes on to say, "The Court nonetheless concludes that the

19 new notes should be deemed issued and outstanding, certain

20 defaults have occurred under the indenture, including violation

21 of 4.09, 4.17," and there are some other bullet points here.

22 Q. Right. This is a notice of default, under the indenture,

23 given by Aurelius on November the 27th in connection with the

24 October exchange and consent solicitation, exchange offers,

25 consent solicitations, and the new notes, right?

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1 A. Yes.

2 Q. Now, do you recall whether or not Aurelius subsequently

3 withdrew that notice of default?

4 A. Yes.

5 Q. And when did Aurelius withdraw that notice of default?

6 A. I don't recall the date.

7 Q. Take a look at tab 5, please. See if this can refresh your

8 recollection. Windstream Exhibit 72.

9 A. I see it.

10 Q. What is Windstream Exhibit 72? What is this document?

11 A. It's titled "Rescission of Notice of Default."

12 Q. And by this document --

13 MR. GODFREY: Mr. Hehn, can you enlarge the third full

14 paragraph, please.

15 Q. Could you read, Mr. Prieto, the first sentence of the third

16 full paragraph into the record.

17 A. "Aurelius hereby gives notice to the company that it is

18 rescinding at this time the November notice of default."

19 Q. Now, the only notice of default that Aurelius ever issued

20 claiming a breach of the indenture in connection with the

21 October 18th exchange offers and consent solicitations and the

22 new notes and the third supplemental indenture was withdrawn on

23 December the 6th, 2017. Correct?

24 A. Could you repeat the question, please.

25 MR. GODFREY: Madam court reporter, could you read

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1 back the question, please.

2 (Record read)

3 A. Yes.

4 Q. Have you ever looked at Article Six and its provisions in

5 the indenture about when an individual noteholder is allowed to

6 initiate a lawsuit for an alleged breach of the indenture?

7 A. Yes.

8 Q. Do you have an understanding of what Article Six provides,

9 sir?

10 A. My understanding of -- well, I think you're referring to

11 Section 6.06 --

12 Q. Correct.

13 A. -- limitation on suits. And my understanding of that

14 section is intertwined with discussions I've had with counsel.

15 MR. GODFREY: Could we pull up page 82, please of

16 Windstream Exhibit 1, Mr. Hehn. Can we enlarge 6.06(a) through

17 (b), Mr. Hehn.

18 Q. "Limitations on suits." Read 6.06(a) for us, Mr. Prieto.

19 A. "A holder of a note may not pursue any remedy with respect

20 to this indenture or the notes unless."

21 Q. "(i) the holder gives the trustee written notice of a

22 continuing event of default with respect to notes." Right?

23 A. That's what the words say.

24 Q. Isn't it a fact, sir, that Aurelius has never given the

25 trustee of a written notice of a continuing event of default

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1 with respect to the notes at issue in this litigation?

2 MR. ROBBINS: Objection, calls for a legal conclusion.

3 It actually sounds like it calls for oral argument.

4 THE COURT: Sustained.

5 Q. Did Aurelius ever give the trustee a written notice of

6 continuing event of default with respect to the August 2023

7 notes that were issued?

8 MR. ROBBINS: Same objection. Same question.

9 MR. GODFREY: No. It's an open-ended question.

10 MR. ROBBINS: Doesn't make it any better.

11 MR. GODFREY: You're not the judge.

12 THE COURT: There's a subtle distinction, but I will

13 allow that one. Overruled.

14 MR. GODFREY: Thank you.

15 Q. Do you want the question read to you, Mr. Prieto?

16 A. Yes, please.

17 MR. GODFREY: Madam court reporter, if I may indulge.

18 (Record read)

19 THE COURT: To be clear, I'd like you to answer based

20 on your sort of understanding of those terms, not necessarily

21 what you understand this provision to mean.

22 A. We did issue a notice of event of default.

23 Q. And you withdrew it then, correct?

24 A. No.

25 Q. You issued a notice dated September 21st with respect to

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1 Section 4.19, right?

2 A. Sir, are you referring to notice of default or --

3 Q. Yes --

4 A. -- something related to an event of default?

5 Q. I'm referring to a notice of default, or a continuing event

6 of default, with respect to the October 18th exchange offer and

7 consent solicitations, the new August 2023 notes, and the third

8 supplemental indenture.

9 A. I guess, it's -- it's difficult for me to answer that

10 without getting into conversations that I've had with counsel.

11 Q. Fair enough. Then I'll move on.

12 Turn to Exhibit 70 in your notebook there, sir,

13 please, tab 3. Do you have that, sir?

14 A. Yes.

15 Q. If you turn to page 5 of Windstream Exhibit 70, how much,

16 in dollar value, of August 2023 notes did Windstream have as of

17 September the 7th, 2017?

18 MR. ROBBINS: I assume you mean "Aurelius have."

19 MR. GODFREY: Yes. Thank you for the correction.

20 A. As of what date?

21 Q. September 7th.

22 A. I don't think the letter speaks to that.

23 Q. Take a look at page 5, the number 183,279, does that

24 refresh your recollection?

25 A. The letter is from September 5th if I'm not mistaken.

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1 Q. Fair enough. As of September 5, $183,279 in notes?

2 A. Yes.

3 Q. Now, you were here in the courtroom this morning, were you

4 not, when Mr. Robbins was asking Mr. Gunderman some questions

5 about reliance, noteholders buying reliance upon covenants of

6 an indenture? Do you recall that?

7 A. Yes.

8 Q. Isn't it true, sir, that Aurelius did not buy $189 million

9 in August 2023 notes in reliance on the compliance with Section

10 4.19 of the indenture, of the governing indenture?

11 MR. ROBBINS: Objection, relevance, your Honor.

12 THE COURT: Sustained.

13 Q. About six days later, roughly, on September 21st, Aurelius

14 owned a great deal more of notes, did it not?

15 A. I don't recall.

16 Q. Turn to Windstream Exhibit 161 in your notebook, please.

17 THE COURT: Tab number?

18 MR. GODFREY: Yes, your Honor. 16.

19 Q. This was a document produced by Aurelius. Have you seen

20 this document before, sir?

21 A. Yes.

22 Q. On September 21, Aurelius now owns how much in notes, of

23 '17, 2017?

24 A. Approximately 224 million, face amount.

25 Q. So between September the 5th and September 21st, Aurelius

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1 bought about another 41 million in notes?

2 A. Correct.

3 Q. And of course on September 21st, that is the date that

4 Aurelius issued, in Windstream Exhibit 70, its notice of

5 default for these very same notes. Right?

6 A. Yes.

7 Q. Aurelius was buying notes that it believed were in default

8 of the indenture at the time it made the purchases, right?

9 A. Well, we believed that there was a default of the

10 indenture.

11 Q. At the time you were making the purchases of these notes.

12 A. Yes.

13 THE COURT: Could I clarify, the 224 million, those

14 were Holdings in the August 2023 notes specifically?

15 THE WITNESS: Yes, your Honor.

16 Q. So let's then look at the same document, which is tab 16.

17 You have it in front of you. And how much more did Windstream

18 buy -- sorry -- did Aurelius buy of these notes between

19 September the 21st and October the 12th, 2017?

20 A. I don't have a calculator, but it looks like 69 million,

21 face amount, approximately.

22 Q. Close enough.

23 So since the issuance of the September 21st notice of

24 default, Aurelius continued to buy more of the notes that it

25 claimed were in default. Correct?

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1 A. Yes.

2 Q. Has Aurelius purchased any more August 2023 notes since

3 November 7th, 2017?

4 MR. ROBBINS: Subject to your Honor's ruling on this,

5 we'll just reserve our objection for the record.

6 THE COURT: Understood.

7 A. I don't believe so.

8 Q. Go to paragraph 8 of your affidavit, please, AX 318. Do

9 you have that?

10 A. Yes.

11 Q. Page 3. Now, the dollar amounts were noted there, $313

12 million. Is that the 299 million plus interest, or is that

13 additional note plus interest?

14 A. Sorry. I don't see the number. Oh. Got it. I see it.

15 You're referring to where it says the amount of July 23, 2018

16 will be 313 million?

17 Q. 313,514,856.81, yes, sir.

18 A. That's 299 plus accrued interest.

19 Q. OK. So it's not additional notes.

20 A. No.

21 Q. Let's change topics. Have you ever met with someone named

22 Dr. Sabry or "Saybree"?

23 A. Yes.

24 Q. How many times?

25 A. I think -- well, other than seeing her in court today, I

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1 think just one prior time.

2 Q. Have you had telephone conversations with her?

3 A. Yes.

4 Q. How many?

5 A. Counsel and I had maybe a couple. I don't recall exactly.

6 Q. Did members of your team at Aurelius meet with Dr. Sabry?

7 A. I believe I was the only one.

8 Q. Did you provide information to Dr. Sabry?

9 A. I don't follow the question.

10 Q. You understand that Dr. Sabry has been retained as an

11 expert to testify on behalf of Aurelius in this litigation, do

12 you not?

13 A. Yes.

14 Q. And she's produced an expert report.

15 A. Correct.

16 Q. Did you provide her with any information which she

17 requested from you?

18 A. Yes. I believe there -- yes.

19 Q. What information did you provide Dr. Sabry?

20 A. Well, when you say Dr. Sabry, I think at one point her team

21 asked if we can send them some cell site reports that were

22 issued on Windstream.

23 Q. By the way, have you met separately with Dr. Sabry's team

24 without Dr. Sabry?

25 A. No.

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1 Q. Did Dr. Sabry ask you and Aurelius to provide her, so that

2 she could prepare her opinion and report in this case, with the

3 trading data of Aurelius and Windstream notes prior to August

4 the 3rd, 2017?

5 A. Not directly.

6 Q. Did she ask you indirectly?

7 A. Well, she may have asked counsel.

8 Q. I see. And did Aurelius refuse to produce to Dr. Sabry its

9 trading data and history of its trading data prior to August

10 the 3rd, 2017?

11 MR. ROBBINS: It may be privileged communication, your

12 Honor.

13 MR. GODFREY: It's already of record, Dr. Sabry.

14 THE COURT: You can ask you can ask Dr. Sabry. So

15 let's carry on with the next question.

16 MR. GODFREY: I was going to ask this witness whether

17 he knew why that was. But I assume from the Court's --

18 THE COURT: I don't think it's relevant.

19 MR. GODFREY: I assume from the Court's looking at me,

20 that I will move on past that question.

21 THE COURT: Good assumption.

22 MR. GODFREY: Thank you.

23 Q. Now, during the time, sir, that you were sending out these

24 three letters to fellow Windstream noteholders, tabs 13, 14,

25 and 15, Exhibits 155, 156, 157, did you ever tell fellow

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1 Windstream noteholders that you were purchasing notes during

2 that time period?

3 A. No.

4 Q. Did you ever tell fellow Windstream noteholders what

5 Aurelius's purpose, in purchasing notes, was during that time

6 period?

7 A. No.

8 Q. I'd like to change topics, to focus on U.S. Bank for a few

9 minutes.

10 MR. GODFREY: And then I'll be wrapping up, your

11 Honor, I think.

12 Q. Is Aurelius directing U.S. Bank to prosecute this lawsuit,

13 to your knowledge?

14 A. Well, we did direct U.S. Bank, months ago, with respect to

15 this lawsuit.

16 Q. And is Aurelius Bank filed -- strike that. Just combined

17 two entities.

18 Is U.S. Bank prosecuting this lawsuit in this trial,

19 at the direction of Aurelius?

20 A. Yes.

21 Q. Now, the original U.S. Bank counsel in this litigation was

22 who?

23 A. I believe it's the same folks that are counsel today.

24 Q. Friedman Kaplan?

25 A. Friedman Kaplan and Maslon.

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1 Q. And who was originally Aurelius's counsel in this lawsuit

2 with respect to the notice of default?

3 A. Friedman Kaplan and Kramer Levin.

4 Q. Same law firm. Same law firm, Friedman Kaplan, right?

5 A. Yes.

6 MR. GODFREY: If you give me one moment, your Honor, I

7 think I may be done.

8 One second. May I take one minute, your Honor? I

9 know it's on my clock, so I apologize.

10 Mr. Marks has persuaded me I'm not quite done.

11 Q. I don't have a copy of this to hand up. This is something

12 that, in light of your testimony, Mr. Marks is pointing out.

13 MR. GODFREY: Can we put up Windstream Exhibit 159,

14 please. Do you have that, Mr. Hehn?

15 Q. Turn to page 5. Let me ask you, have you seen this

16 document before, sir?

17 A. It's hard for me to say, just showing me one page.

18 Q. Take a look at the first page, sir, page 1.

19 MR. GODFREY: Let me confer a minute with Mr. Robbins.

20 I want to make sure of something.

21 (Counsel confer)

22 MR. GODFREY: I didn't want to cross the tripwire,

23 your Honor.

24 Q. OK. So this is an e-mail from whom, sir, with an

25 attachment?

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1 A. The topmost e-mail was sent by me.

2 Q. Topmost e-mail. Who is the sender? Who's the "from"?

3 A. I think the --

4 THE COURT: Dennis Prieto.

5 Q. That's you.

6 A. That's what I said.

7 Q. And the attachment, starting on the next page, is a

8 memorandum from Kramer Levin to U.S. Bank. Right?

9 A. Yes.

10 Q. You've seen this document before, right?

11 A. Yes.

12 Q. Turn to page 5, please, Windstream Exhibit 159, page 5.

13 MR. GODFREY: And, Mr. Hehn, can you enlarge, please,

14 the first full paragraph, "regardless."

15 Q. Can you read that first full paragraph from the Kramer

16 Levin law firm to U.S. Bank into the record.

17 A. "Regardless of any officers' certificate that the company

18 may deliver to the trustee, the trustee must satisfy itself

19 that the additional notes are permitted under Article Four.

20 The trustee is prohibited from authenticating additional notes

21 where the issuance of those notes would violate any of the

22 negative covenants of the indenture."

23 Q. And that's what Aurelius, through its counsel, told U.S.

24 Bank on October the 27th, 2017. Correct?

25 A. Yes.

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1 Q. And U.S. Bank, ten days later, wanted them to authenticate

2 the notes? Right?

3 A. Yes.

4 Q. Final question. You mentioned that Aurelius, in answer to

5 Judge Furman's question, you mentioned that Aurelius had

6 nominal amounts of the 2021, 2022, and April 2023 notes. Did

7 you engage in any trade of those notes?

8 THE COURT: Can we get a time period on this?

9 MR. GODFREY: Sure.

10 Q. Between November 6, 2017 and now.

11 A. I don't believe so.

12 Q. Did Aurelius ever exchange any of the 2022 notes in

13 connection with the first exchange offers?

14 A. No.

15 MR. GODFREY: No further questions, your Honor. Thank

16 you very much. We will pass the witness.

17 REDIRECT EXAMINATION

18 BY MR. ROBBINS:

19 Q. I'm just going briefly this afternoon. I will try to get

20 you out of here by 3 o'clock, Mr. Prieto.

21 Just three lines of questions. You were asked at the

22 outset of cross-examination some questions relating to AX 188,

23 which is 22 in the binder that Mr. Godfrey provided to you.

24 Could I ask you to find that, please. Tell me when you're

25 there.

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1 A. I have it.

2 MR. ROBBINS: Now, Joe, could I trouble you to call

3 up -- I want to go to the very paragraph Mr. Godfrey drew the

4 witness's attention to. I think he even called it the big

5 paragraph on this page. It's the third one. And highlight, I

6 want to go to, directly, to the sentence that Mr. Godfrey

7 called to your attention that begins "the company is revising

8 the terms." Do you see that? And could you just highlight

9 that sentence, Joe, please.

10 Q. All right. Do you see that one, Mr. Prieto?

11 A. Yes.

12 Q. And you were asked, I believe, some questions arising from

13 the statement "the company is revising the terms." Do you see

14 that?

15 A. Yes.

16 Q. Is there anything in this press release, AX 188, that

17 alerts anyone receiving it and reading it that the what

18 Windstream has called, what Mr. Gunderman called the August

19 2023 condition, is there any indication that the August 2023

20 condition has been changed, and if so in what way it has been

21 changed?

22 A. Can I take a moment, just view that? I don't remember.

23 Q. OK. I just want to focus you on the highlighted provision

24 that Mr. Godfrey drew your attention to. And my question is,

25 is there anything in it that alerts a reader that the August

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1 2023 condition in particular has been altered.

2 A. No. In fact, I think this refers to the other note series.

3 Q. Let me direct your attention -- you can put that one away.

4 MR. ROBBINS: Joe, you can take that down.

5 Q. You were asked some questions about 2.02 of the indenture.

6 That's tab 1 in your notebook. And it is page 36 of the

7 document in the lower right. And you were asked some questions

8 about whether it provides for the authentication by the

9 trustee. Do you recall those questions?

10 A. Yes.

11 Q. I want to draw your attention to another provision if I

12 could. And it's the one that begins towards the bottom of the

13 page. It begins "the company may." Do you see that?

14 MR. ROBBINS: Joe, could you highlight that. Maybe

15 just lift up the page a little bit because I don't think that's

16 the bottom of the page, although maybe it is on this copy. For

17 some reason in the notebook it goes on from there.

18 Q. But in any event, just do you see the "the company may"?

19 Do you see that?

20 A. Yes.

21 Q. And what is the next phrase?

22 A. "Subject to Article Four of this indenture and applicable

23 law."

24 Q. And since you were asked your understanding of this

25 provision, may I just ask you if you also have an understanding

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1 as to the phrase "the company may, subject to Article Four of

2 this indenture and applicable law, issue additional notes under

3 this indenture"? First of all, do you have such an

4 understanding that you can separate from any advice of

5 communications of counsel?

6 A. Yes. I think the words are self-evident.

7 Q. What does it mean?

8 A. So I think what it means is that --

9 THE COURT: Sustained.

10 MR. ROBBINS: All right.

11 MR. GODFREY: Thank you, your Honor.

12 Q. Last question. You were asked some questions about the

13 third supplemental indenture. That's in, I believe, tab 9, WIN

14 116. Do you see that, sir?

15 A. Yes.

16 Q. And I want to draw your attention to another provision of

17 that. Turn to page 4 of the third supplemental indenture. And

18 in particular I want to direct your attention to some language

19 that is in Section 1.04, and it begins "to the extent" and goes

20 on for several words thereafter. Do you see that language,

21 sir?

22 A. Yes.

23 Q. Now, without revealing or relying on counsel communication,

24 do you happen to know how this language got into the third

25 supplemental indenture?

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1 MR. GODFREY: Objection, foundation.

2 MR. ROBBINS: I'd be glad to provide the foundation,

3 exactly what I'd like to do. Can I?

4 THE COURT: Well, the question was just, do you know,

5 yes or no. So first answer that.

6 A. Yes.

7 MR. ROBBINS: May I ask the next one?

8 THE COURT: You can try.

9 Q. How did it get in there?

10 A. Well, I believe the trustee and the company agreed to it.

11 Q. Let me just ask you -- this is a document that's not in the

12 binder.

13 MR. ROBBINS: Joe, would you hold up, please, AX 321.

14 And if I could approach the witness and hand him a

15 hard copy.

16 THE COURT: You may.

17 Q. You notice that the document here is headed by a chain of

18 e-mails? Do you see it, sir?

19 A. Yes.

20 Q. And at the bottom of the first page, there's an e-mail from

21 the Maslon firm, correct?

22 A. Yes.

23 Q. And you know them, I believe you've identified them on

24 cross as one of the lawyers for the trustee. Correct?

25 A. Yes.

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1 Q. And this one comes from a gentleman named Clark Whitmore.

2 Do you know who he is?

3 A. Yes.

4 Q. Who is he?

5 A. He is one of the attorneys at the Maslon firm, working on

6 this matter.

7 Q. He is forwarding --

8 MR. GODFREY: Objection, your Honor. There's no

9 evidence that this witness was part of this conversation. He's

10 just being a conduit to read a document into the record.

11 THE COURT: Have you seen this document before?

12 THE WITNESS: I don't recall if I've seen -- I don't

13 recall.

14 THE COURT: All right. Sustained.

15 MR. ROBBINS: Well, it's in evidence and we can argue

16 about it, and I'm done. Thank you, Mr. Prieto.

17 THE COURT: Thank you. Any recross?

18 MR. GODFREY: I think your Honor will know the answer

19 to that question. But no. Thank you for asking.

20 THE COURT: Very good.

21 Mr. Prieto, you may step down.

22 (Witness excused)

23 THE COURT: Much as I like to use every minute, it's

24 2:59, so we have one minute; I think we will break there.

25 I take it tomorrow we will start with Mr. Cheeseman.

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1 Is that correct?

2 MR. ROBBINS: That's my understanding. And then we'll

3 go right to Dr. Sabry.

4 THE COURT: All right. And just for my planning

5 purposes, it seems to me like we might finish the evidentiary

6 portion of the case tomorrow. Is that -- I don't know how long

7 you guys anticipate the crosses of the two experts, or for that

8 matter the other witnesses to be, and I know that there is

9 still the matter of Mr. McCarty's testimony, which I haven't

10 formally ruled on. I will do so tomorrow morning. But for

11 now, again, my preliminary ruling is that he may testify

12 subject to my decision later as to the arguments that Aurelius

13 has made.

14 MR. GODFREY: There are four witnesses, your Honor, so

15 I suspect we'll finish tomorrow, but I don't know how long

16 we'll with Mr. Cheeseman, and there are three witnesses

17 experts. So I think we can safely say by noon on Thursday

18 we'll be done, but I don't know about tomorrow.

19 THE COURT: I'm just trying to figure out for my

20 planning purposes.

21 Anything else?

22 MR. ROBBINS: No. And I agree with Dennis.

23 THE COURT: All right. And anything anyone needs to

24 discuss with me?

25 MR. GODFREY: No, your Honor. Thank you very much.

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1 THE COURT: All right. Just to remind you, tomorrow

2 we will be sitting a longer day. We will start promptly at

3 9:30, take a longer break at about 1 and short breaks in the

4 morning and afternoon and carry on until 5. And hang on one

5 second.

6 All right. With that, I wish you all a pleasant

7 afternoon. I do have other matters in here this afternoon. So

8 if you could just clear the tables or push your things to the

9 side at least, that would be great. And I'll see you tomorrow

10 morning.

11 (Adjourned to 9:30 a.m., July 25, 2018)

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 INDEX OF EXAMINATION

2 Examination of: Page

3 SAUL SOLOMON

4 Direct By Mr. Howell . . . . . . . . . . . . . 238

5 ROBERT GUNDERMAN

6 Direct By Mrs. Karis . . . . . . . . . . . . . 245

7 Cross By Mr. Friedman . . . . . . . . . . . . 247

8 Redirect By Mrs. Karis . . . . . . . . . . . . 269

9 Recross By Mr. Friedman . . . . . . . . . . . 280

10 Redirect By Ms. Karis . . . . . . . . . . . . 292

11 Recross By Mr. Friedman . . . . . . . . . . . 297

12 Cross By Mr. Robbins . . . . . . . . . . . . . 299

13 Redirect By Mrs. Karis . . . . . . . . . . . . 337

14 Recross By Mr. Robbins . . . . . . . . . . . . 345

15 DENNIS PRIETO

16 Direct By Mr. Robbins . . . . . . . . . . . . 365

17 Cross By Mr. Godfrey . . . . . . . . . . . . . 367

18 Redirect By Mr. Robbins . . . . . . . . . . . 412

19 DEFENDANT EXHIBITS

20 Exhibit No. Received

21 WIN 192 . . . . . . . . . . . . . . . . . . 240

22 189 . . . . . . . . . . . . . . . . . . . . 241

23 193 . . . . . . . . . . . . . . . . . . . . 246

24 AX 318 . . . . . . . . . . . . . . . . . . 367

25

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