Shares of telecom carrier Windstream fell $2.06 (-61.13%) to $1.31 as investors ran away from the company following a federal judge's decision in favor of its bondholders.

The hedge fund Aurelius Capital Management, a major holder of Windstream bonds, said that Windstream violated the condition of its bonds when, in 2015, it spun off its Windstream Services subsidiary into a real estate investment trust (REIT) called Uniti Group.

Windstream's market capitalization was $144.7 million as of the afternoon of Friday, February 15, and had fallen to $56.3 million by the close of business on Tuesday, February 19.

The hedge fund really rubbed it in when it issued a response to Windstream management on Tuesday.

"According to its statement last Friday, Windstream now intends to appeal," the bondholder wrote. "This is welcome news for our fund, as it will require Windstream to post a surety bond exceeding $300 million. That surety bond will pay in full the notes our fund owns when Windstream loses the appeal. We are happy to take the surety company's credit over Windstream's."

Then the hedge fund flipped off the other Windstream debt holders. "To noteholders who chose to play the company's game even after it had broken its promise, we wish you luck with your exchange notes," the company said in its statement. "Between their dubious status and their OID [original issue discount] risk in bankruptcy, we suspect you will need it."

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— Phil Harvey, US Bureau Chief, Light Reading