TheChek News Flow

Blackstone’s property fund meets redemptions for first time in over a year

Well . . . no, not really, but the deal still doesn’t make a ton of sense

Altice USA has a lot of debt. Like $25bn of net debt, or 6.7 times Ebitda.

This fact, in itself, wouldn’t normally be worth a blog post. But it provides helpful context for this week’s report that Charter Communications has been considering approaching Altice USA about a takeover.

The outlook for a deal warrants scepticism for a few straightforward reasons, argues CreditSights:

1) Regulators may not be eager for a tie-up of two companies with overlapping presences: Optimum Cable, owned by Altice, is a sizeable provider in the New York City area, as is Charter.

2) Any significant savings from a deal would first require “heavy upfront merger and integration costs,” so CreditSights analysts say they “would not be able to immediately bake in a chunky synergy number into our leverage and credit metric analysis” for their post-deal estimates, starting at $500mn.

3) Charter also has a lot of debt — $98bn — and the analysts say it’s “crucial” for the cable operator to keep an investment-grade rating on its $54bn of senior secured bonds.

But there’s another interesting wrinkle here.

The deal would need to be structured to avoid triggering change-of-control covenants on $17bn of Altice’s bonds, as Covenant Review points out in a separate note. (Both Cov Review and CreditSights are owned by Fitch Solutions.)

If all of the assets of the company are sold to people who aren’t “Permitted Holders” — ie billionaire Patrick Drahi and a handful of institutional investors/holdcos — and if a “person or group” ends up with more than 50 per cent of the voting rights, bondholders can redeem at 101.

This would be a hefty cost, to say the least, as Altice’s bonds were trading all over the map before the news (the lowest-rated were trading below 50c on the dollar before the deal).

It’s rare that a change-of-control clause acts as a significant barrier to a deal, but getting around this one could take a bit more effort than normal.

Charter would probably need to pursue a direct merger instead of pursuing the now-standard procedure of creating a subsidiary to buy it, says Covenant Review. That’s because a subsidiary would have more than half of Altice USA’s voting rights, whereas a merger directly into the parent would mean voting rights are distributed among Charter’s many shareholders.

That is doable, of course. But even if Charter jumps through that hoop, it still matters that both it and Altice USA have a lot of debt. (Have we mentioned that? There’s lots.) A tie-up could still easily breach other leverage covenants after completed, meaning it would still require bond redemptions. Covenant Review didn’t get too far into those, as it is also sceptical about the prospect of a deal going forward. This week’s report said it wasn’t clear if Charter had made any formal approach.

But until Charter “formally rules out M&A”, the CreditSights analysts write, “we think there may be a new floor for Altice USA bonds.” Good for them!?

Exit leaves barely any senior managers from failed Swiss bank remaining at combined group

The former head of Credit Suisse’s wealth management business, Francesco de Ferrari, has become the latest executive of the fallen bank to leave UBS.

Less than a year after UBS’s rescue of Credit Suisse, just a handful of Credit Suisse senior managers remain at the enlarged Swiss bank, including former chief executive Ulrich Körner.

De Ferrari was head of Credit Suisse’s wealth management business, its most important division, and was seen by some internally as a potential future chief executive. But he missed out on an executive position at UBS after it took over its former rival last year.

The 54-year-old — who rejected a job at Goldman Sachs at the age of 20 to work with Mother Teresa in India — left UBS at the end of the year and is serving a period of gardening leave, according to people with knowledge of his position.

De Ferrari had been serving as a senior adviser to Iqbal Khan, the head of UBS’s wealth management business, since last summer. Swiss financial news outlet Tippinpoint was first to report his departure.

Born in the US and with dual Italian and Swiss citizenship, de Ferrari began his career as an auditor, before working at Credit Suisse between 2002 and 2018. He then moved to Australia, where he became chief executive of wealth manager AMP Capital.

De Ferrari had a bruising stint at the top of AMP, which was criticised over its handling of a sexual harassment case, while shareholders were unhappy over the group’s dealmaking record.

He was brought back to Credit Suisse at the start of 2022 to rejuvenate its wealth management division as part of a broad restructure under chair António Horta-Osório and chief executive Thomas Gottstein.

But less than a year later, under a new chair and chief executive, the bank underwent another restructuring.

In addition to Körner, the only other Credit Suisse executive board members still employed by UBS are André Helfenstein, who ran the domestic business; Christine Graeff, the head of people; and Nita Patel, the chief compliance officer.

Their roles will be reassessed when the UBS and Credit Suisse legal entities are merged this year.

Last year brought the departures of former Credit Suisse chief financial officer Dixit Joshi, general counsel Markus Diethelm, head of the Asia-Pacific region Edwin Low, co-head of the investment bank David Miller, co-head of markets Ken Pang, chief technology and operations officer Joanne Hannaford and chief operating officer Francesca McDonagh. 

More than 16,000 staff left the combined group in 2023, with tens of thousands more jobs expected to go in the coming years as the bank focuses on hitting cost-reduction targets.

UBS declined to comment and de Ferrari did not respond by the time of publication.

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