Goldman Sachs tried to cut its debt exposure to Altice
US bank approached several funds in attempt to sell part of a loan made to French group
Goldman Sachs has tried to cut its debt exposure to Altice, the French telecoms and cable group whose share price has more than halved in the past month, in the latest sign of nervousness about the company’s €51bn debt pile.
Goldman Sachs has been one of the biggest lenders to Altice and its founder, Patrick Drahi, over the past five years, providing the Franco-Israeli billionaire’s private investment vehicles with margin loans and other debt facilities in the run-up to the group’s initial public offering in 2014. The US bank has also been one of the main beneficiaries of investment banking fees paid out by Altice in the past few years as it embarked on an acquisition spree in France, Portugal and the US.
As concerns grew about the company’s performance in November, Goldman Sachs approached several funds in an attempt to sell part of a loan it had previously made to Altice, according to persons familiar with the matter. The US bank’s attempt to sell on this debt suggests that the price collapse of the heavily indebted company’s public shares and bonds is starting to rattle some of its core lenders.
Goldman Sachs and Altice declined to comment on the matter.
“The banks with very large exposures are nervous,” said one senior debt banker.
Goldman Sachs is one of the main lenders to Altice’s “topco” — the entity at which its Netherlands-listed shares sit and which has more than €2.3bn of debt. In contrast to most of Altice’s €51bn debt, this has never been publicly syndicated to institutional investors and sits on the balance sheets of what the company calls its “relationship banks”.
One credit fund manager said that Goldman Sachs “tried to syndicate their topco debt” in November, which he said had made funds that the bank approached over a potential debt sale more concerned about the group’s finances.
“I think for a lot of people it was a big warning sign,” he said. “Goldman clearly blinked on it, as they can be a bit more pre-emptive [than other banks] in how they handle their credit risk.”
Altice increased this topco loan facility by €950m in August, meaning its banks took on additional exposure just a few months before the company’s shares and bonds came under significant pressure.
Altice has pledged to cut its debt by selling non-core assets and turning round operations in its largest market of France. The group has repeatedly tried to assert that it is financially stable despite the decline in its share price, pointing out that it has no significant debt maturities coming up for renewal until 2022.
The banker added that Altice’s larger lenders have also provided private financing to Mr Drahi himself, adding to their overall exposure to the group.
“That’s the other side of the coin, which is not public: just how leveraged Drahi is personally,” he said.
The company publicly announced in November that Next Alt — Mr Drahi’s main investment vehicle — does not have “any margin loan exposure to Altice”, in an attempt to reassure investors about the impact of the founder’s private debt.
But Goldman Sachs two years ago provided Next Alt with a “funded collar” facility — a complicated derivatives options trade on Altice shares — that was used to repay margin loans and other debt that the US bank had earlier lent to Mr Drahi’s investment vehicle.
This collar facility is still outstanding, meaning that Goldman Sachs is exposed to a fall in the share price, which has fuelled concerns that it could force the bank to sell Altice shares. Altice said that this speculation is “unfounded”, however, as under the facility the US bank has in fact been a “natural buyer as the shares have traded lower”.
Altice Luxembourg’s bonds on Monday fell to their lowest prices since July 2016, with its euro bond maturing in 2025 falling to as low as 91.5 cents on the euro. Bond yields rise as prices fall and this €750m bond is now yielding nearly 8 per cent.
Asia Market Update: RBA leaves rate unchanged, RBNZ Spencer comments boost Kiwi
***Headlines/Economic Data***
-General Themes: Asian tech stocks weaker after declines seen in NY session; Taiwan Semi -2%
Markets generally pare opening losses
-Japanese and South Korean steelmakers outperform; track earlier gains in US Steel
-China Caixin Nov services PMI rises, in line with official data released on Nov 30th
Japan
-Nikkei 225 opened -0.5%; closed -0.4%
-Tech and Chip-related shares track weakness in US companies: SUMCO -3.5%, Tokyo Electron -2%, Softbank -0.9%; Olympus Corp -1.6% (priced secondary offering)
-TOPIX Iron & Steel Index +1.5%; Nippon Steel said to reduce orders accepted for steel pipes by 20-30% as production cannot keep up with the increase in demand from large-scale projects ahead of the 2020 Tokyo Olympics (press)
-TOPIX Securities Index +1%
-Japan Nov PMI Services: 51.2 v 53.4 prior, PMI Composite: 52.2 v 53.4 prior
-(JP) Bank of Japan (BOJ) Gov Kuroda: No discussions about second term as Gov - speaking after lunch with Abe; No comment on whether willing to continue as BOJ Gov (**Note: current 5-year term due to end April 2018)
-Bank of Japan (BOJ) Gov Kuroda recent references to the "reversal rate" may signal a shift to a more hawkish policy bias, even though there are no expectations of a near term policy change – FT (**Note: The reversal rate is the level where rate cuts by BOJ could hurt economy)
-Japan Fin Min Aso: Wants income tax changes to be revenue neutral and consider ‘work style’ changes
-China and Japan officials to hold 8th round of discussions regarding maritime affairs during Dec 5-6th period - financial press
- (JP) Japan's four biggest oil companies are expected to beat FY forecasts – Nikkei
- (JP) Bank of Japan (BOJ) Gov Kuroda: BOJ bought ¥105T in JGBs in year through Oct
- Japan MoF sells ¥2.3T v ¥2.3T indicated in 0.1% 10-yr JGBS; avg yield 0.059%; bid-to-cover 3.70x
- 9983.JP Reports Nov Domestic SSS +8.9%; Uniqlo sales +8.9% y/y; +3%
Korea
-Kospi opened -0.4%
Samsung Electronics -0.7%
Posco Steel +2%
Korean Won (KRW) +0.3%
(KR) South Korea President Moon: Trade faces difficulties including 'strong' Won (KRW); S. Korea should create more jobs through exports
-(KR) South Korea Nov Foreign Reserves: $387.3B (record high) v $384.5B prior
-(KR) South Korea Oct Current Account Balance: $5.7B v $12.3B prior; Balance of Goods (BOP): $8.6B v $15.0B prior
China/Hong Kong
Markets open lower: Hang Seng -0.8%; Shanghai Composite -0.2%
Hang Seng Information Technology Index -1.2% (Tencent -2%)
China defense names stronger on report that China has encouraged asset injections – press
(CN) China reportedly will keep exempting 10% purchase tax on electric vehicles to 2020 - press
-(CN) China Nov Caixin PMI Services: 51.9 v 51.2 prior, PMI Composite: 51.6 v 51.0 prior
-(HK) Hong Kong Nov PMI: 50.7 v 50.3 prior
-PBoC skips open market operation for 3rd straight session, reiterates liquidity at ‘high level’; net drain CBY170B v CNY90B prior
-(CN) PBoC sets yuan reference rate at 6.6113 v 6.6105 prior
-(CN) Chinese Think Tank (State Info Center): Recommends China 2018 GDP target be set around 6.5%
-(CN) China should cut real interest rate – China Securities Journal
-(CN) Former PBoC Adviser Yu Yongding: Investment growth to slowdown in 2018 amid further slowdown in property investment; monetary policy should stay appropriate and 'not too tight’; Urges China to introduce property tax
-(CN) PBOC Financial Research Institute Head Sun Guofeng: New monetary policy framework is taking shape; monetary policy targets should consider financial cycles; Central banks need to influence long-term interest rates.
-(CN) China Vice Fin Min Zhu Guangyao: Sees worldwide economy recovery momentum in 2017; Attention needed to impact of Fed balance sheet reduction; Whether the ECB is to quit QE is yet to see
-(CN) China should ‘brace’ for fallout from US tax cuts as they could challenge domestic manufacturing sector; China should take steps to cut enterprise costs – China Press
-(CN) China Premier Li: China and Canada agree to uphold trade liberalization; to continue talk on bilateral free trade agreement (FTA)
Australia/New Zealand
-ASX 200 opened -0.1%; Closed:
-ASX 200 Financials Index -0.3%; Utilities Index +0.9%
-Rio Tinto [RIO.AU] -1.6% (gained 1.2% during prior session)
-Qantas [QAN.AU] -1.6%
-AWE Ltd [AWE.AU] -11% (China Energy Reserve withdrew takeover offer yesterday)
-Aussie rises amid better than expected Oct retail sales; Q3 data (Current Account, Net Exports of GDP) below ests
-(AU) AUSTRALIA OCT RETAIL SALES M/M: 0.5% V 0.3%E
-(AU) AUSTRALIA Q3 BOP CURRENT ACCOUNT (A$): -9.1B V –9.6B PRIOR; NET EXPORTS OF GDP: 0.00 V 0.30 PRIOR
-Aussie adds to gains following RBA statement
-(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (16TH CONSECUTIVE HOLD IN CURRENT EASING CYCLE); The Australian dollar remains within the range that it has been in over the past two years; One continuing source of uncertainty is the outlook for household consumption
-Kiwi rises following comments from RBNZ Gov Spencer
-(NZ) RBNZ Gov: Persistently low inflation has prompted central bank to think about whether it needs to ‘tweak’ its approach to monetary policy; Should be cautious about making any recommendations for change in current framework
-(NZ) NEW ZEALAND Q3 VOLUME OF ALL BUILDINGS Q/Q: 2.7% V 2.0%E
- (NZ) New Zealand Government 4-Month budget balance (NZ$): -308M v -217Me
- (NZ) New Zealand Nov ANZ Commodity Price: -0.9% v -0.3% prior
- AWE.AU China Energy Reserve formally withdrew offer -15%
-Looking Ahead: Australia Q3 GDP due to be released on Wednesday
North America
-US equity markets pared gains and closed mixed amid passage of Senate tax bill: Nasdaq -1.1%, S&P 500 -0.1%, Dow Jones +0.2%, Russell 2000 -0.3%
-S&P 500 Technology Sector -1.6%, Healthcare -1.2%
-MasterCard raised quarterly dividend by 14% and announced new $4.0B buyback plan
-M&A: 21st Century Fox: Reportedly favors Disney as prospective acquirer for its studio and media assets – press
- Packaging company Bemis Co said to hire adviser to examine options – US Press
Tax Reform: (US) House votes for motion to go to conference with Senate on tax bill (as expected)
-Government Funding: (US) US Republicans: Will pursue stop-gap government spending measure through Dec 30th – US financial press (**Note: According to prior speculation, a potential govt shutdown is looming on Dec 8th unless Congress can pass a new spending bill. Republicans are preparing a two week stop gap spending bill)
-(US) Democratic Leaders Pelosi and Schumer to meet with Pres Trump and GOP leadership on Thurs – press
-Looking Ahead: US Nov ISM Non-Manufacturing data to be released on Tuesday
Europe
-(UK) EU's Juncker: it was not possible to make a complete Brexit deal today (comments from Monday); will need further talks to reach a complete deal; did make considerable progress - comments in Brussels; Will continue discussions with the UK this week; there are only two or three points still open; Has confidence we can make sufficient progress by time of leaders' summit (Dec 14-15)
-(UK) Prime Min May: we had a constructive meeting with the EU; have been negotiating hard and want to move forward together; We need more consultations on some issues; positive that the two sides will conclude this positively
-(UK) Nov BRC Sales LFL Y/Y: +0.6% v -1.0% prior
-(EU) Eurogroup President-designate Centeno: deeper discussions are needed on a euro zone fiscal union; there is a long way to go
-(EU) Portugal Fin Min Mario Centeno wins Eurogroup chairmanship race; term starts in Jan - press
-(GR) ESM's Regling: it's a bit premature to be precise about the size of the Greece tranche; It's more likely that there's one more review left in the Greek program
***Levels as of 01:00ET***
- Nikkei225 -0.2%, Hang Seng -0.5%; Shanghai Composite -0.2%; ASX200 -0.2%, Kospi +0.2%
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.1%, Dax +0.3%; FTSE100 +0.4%
- EUR 1.1877-1.1862; JPY 112.63-112.38; AUD 0.7654-0.7596;NZD 0.6908-0.6852
- Feb Gold +0.1% at $1,278/oz; Jan Crude Oil +0.1% at $57.51/brl; Mar Copper +0.1% at $3.09/lb
Nov trading update: raises FY17 production guidance, lowers Capex guidance
• Full year 2017 West Africa net oil production guidance, including production-equivalent insurance payments, revised upwards to 85-89,000 bopd (from 78-85,000 bopd), following strong production performance from both TEN and Jubilee.
• TEN FPSO commissioning completed; 2017 gross production now expected to exceed guidance of 50,000 bopd following higher rates in the second half of the year; final ITLOS tribunal decision results in no adverse impact to the TEN fields and allows development drilling to resume in early 2018.
• Greater Jubilee Full Field Development Plan approval received from the Government of Ghana – drilling to commence in 2018; Jubilee turret remediation work optimised and now planned for 2018 with seven-to-nine weeks of total shut-down.
• Uganda farm-down submitted to the Government for approval following signature of pre-emption documentation; deal completion expected in the first half of 2018. Working towards FID in the first half of 2018, with FEED and ESIAs for upstream and pipeline progressing in line with schedule.
• South Lokichar Exploration and Appraisal drilling campaign now concluded, results being evaluated and incorporated in the development plans. Early Oil Pilot Scheme (EOPS) is now expected to commence early in 2018.
• Araku-1 wildcat well drilled in Block 54 in Suriname; no significant reservoir quality rocks encountered, but presence of gas condensate de-risks deeper plays for future possible exploration. • 2017 Capex guidance reduced to c.$0.3 billion; free cash flow of around $0.4 billion forecast for 2017; Net debt at 31 October 2017 reduced to $3.6 billion. The RBL re-financing is on schedule to complete before year-end.
CEO: “I am pleased to report that Tullow continues to make good operational and financial progress. The business is generating free cash flow which is enabling us to continue to reduce our debt. We have upgraded our oil production forecasts for West Africa following strong production at both Jubilee and TEN. In East Africa, both our projects are making steady progress towards Final Investment Decisions with our Kenyan business beginning the important shift from exploration and appraisal to development. With financial discipline and efficiency embedded across the Group, and with market conditions showing some early signs of improving, Tullow is well placed to benefit both from targeted investment in our diverse, low-cost portfolio and the opportunities that this point in the cycle presents.”
Comcast at at UBS 45th Annual Global Media and Communications Conference notes
- Optimistic about portfolio they have, but it's there job to evaluate and consider options to create value for shareholders even if there is not necessarily a strategic gap to fill.
-
Looking ahead to 2018, what are Comcast's priorities?
- Cable: Focused and optimistic about connectivity businesses.
- Video: Very confident and proud of X1 platform and the bundle, believes video is important.
- New businesses: Xfinity Home, home security product has grown to past 1 mln subscribers. Xfinity Mobile is adding subscribers as they speak, very excited about what they've seen so far.
- TV: Continued growth in re-transmission, sports and news packages continue to drive strong affiliate fee growth.
- Theme parks: Japan park is doing great, continues to work on new Universal Studios theme park in Beijing.
- Film: One of best years in history of studio in 2017. In 2018 they are releasing a new Jurassic Park film and a new Fifty Shades film, among others
- Excited about tax reform, looks forward to the final details, and figuring out what it means.
-
Video business
- Stable, no worse. Thinks video is an important product, expects to come in within expectations in Q4.
- Looking for what people want, great broadband is the great enabler of products which they have. On all of the alternative products they have, they believe there is a good opportunity to upsell their products over time.
- Expects TV advertising to continue being a large business due to reach and quality of platform.
- NBC will broadcast the Super Bowl this year, and the Winter Olympics this year.
- Subs will decline around 1.5%/year, which looks relatively stable.
-
Broadband business
- 12th year in a row where they will exceed 1 mln net adds, now expect to exceed 1.1 mln net adds. Set up well for 2018.
- 45% penetrated in their footprint, believes there is opportunity for deeper penetration.
- Seeing 40% growth y/y in data usage across network.
-
Xfinity Mobile launch update
- Very pleased with what they are seeing (on last earnings call noted that 250K lines had been added)
Shares of CMSCA are trading up 2.9% at 39.54/share in pre-market trading.
CVS Health, AET Merger Call
- Halt of share repurchase program is in effect as of today.
- May re purpose store space to expand retail clinics.
- Announcement has no baring on providing service to ANTM.
- AET- Not giving guidance, will provide projections in S-4 when it is released; Still sees a flat revenue year in 2018; headwinds and tailwinds remain the same from its last earnings call; AET also will not be repurchasing shares which would be the only key difference between the current projections.
- Of the $750 mln synergies for 2019, notes it is all cost synergies, not revenue synergies; Longer term there is more opportunities to grow revenues.
- Cost of the debt will depend on the tenor it places its portfolio; Current thinking is in the 4% zip code.
CVS slides to $72.41 on the call; AET has pulled back about 3 points from its highs, $184 is setting yup as early support.