(Bloomberg) -- The fate of Windstream Holdings Inc. was cast into doubt after a court ruled that the rural phone company defaulted on its bonds in 2015 by spinning off Uniti Group Inc.

The ruling in Manhattan federal court is a victory for New York hedge fund Aurelius Capital Management LP, which contends that the deal unfairly stripped bondholders of assets that back up their investment. Windstream, which serves about 1.4 million consumers and small businesses in 18 states, has warned that a defeat could force it into bankruptcy.

The court ruled that actions by Windstream Services actions amounted to a breach of its financial covenants, and said Aurelius is entitled to a $310 million monetary judgment, according to the ruling. The court also dismissed Windstream’s counterclaims against Aurelius.

Representatives for Windstream didn’t immediately respond to messages seeking comment. Aurelius, run by Mark Brodsky, also didn’t immediately respond.

--With assistance from Rick Green.

To contact the reporters on this story: Allison McNeely in New York at amcneely@bloomberg.net;Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net

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