The standoff between Drahi and his creditors is getting tougher against the backdrop of a subscriber hemorrhage at SFR
After taking a step towards the banks during negotiations on Altice's €24 billion debt, billionaire Patrick Drahi has transferred an asset beyond their reach.
SFR's situation continues to worsen. The turnover of Altice France, the operator's parent company, fell by 4.7% in the third quarter to €2.5 billion, according to the results published on Wednesday, November 27. Its gross operating surplus (EBITDA) fell by 9.9% to €879 million. The drop in subscribers continues, with 106,000 fewer mobile subscribers and 53,000 fewer fixed-line customers compared to the previous quarter.
Not enough to reassure creditors, so in the middle of a standoff with Patrick Drahi to renegotiate the group's colossal debt. In mid-November, Patrick Drahi and his debt holders stopped negotiations on the €24 billion debt weighing on Altice France. The billionaire, owner of the telecoms operator SFR, had just placed his subsidiary XpFibre in an entity outside the scope of Altice France, which thus escapes its lenders. "You can't negotiate a debt on a company and empty it of its assets at the same time!" complains a source.
According to a person close to the case, "this is an attempt at extortion and blackmail, it is not in the company's interest to dispose of an asset". In the coming weeks, the lenders will open litigation, assures the same source. For Timothée Gagnepain, a lawyer specializing in debt restructuring for the firm McDermott Will & Emery, "funds want to maximize their profits and do not hesitate to go far and use the weapon of litigation."
An agreement in sight for Drahi and his creditors
The announcement could be a way for Patrick Drahi to exert pressure on his creditors. During the first round of discussions between the billionaire and the lenders of the 20 billion in secured debt, that is to say guaranteed by assets, each camp had taken a step towards the other. The head of SFR – and the 17th largest professional fortune in France – had said he was ready to immediately pay 2.6 billion euros in exchange for the cancellation of the old debt and the establishment of a new one, of 13.7 billion, at an average interest rate of 6.5%, and the postponement of the repayment deadlines to 2029 and 2031. That is a two-year breather compared to current maturities.
In return, the creditors could obtain 18% of the capital of Altice France. In a counter-proposal, the latter, led by the firms Gibson, Dunn & Crutcher and Rothschild & Co, asked for more: a new debt of 14.4 billion euros, an interest rate of 7.5% and an increase in capital to 34%.
A cooperation agreement
But the negotiations have not gone any further for the moment and Patrick Drahi preferred to transfer XpFibre out of their reach. "The discussions are extremely long because each creditor has divergent interests, no one bought the debt at the same price," puts into perspective an investment banker.
The creditors have joined forces in a "cooperation agreement", an instrument frequently used in the United States that allows them to speak with one voice. Nearly 95% of the creditors of the secured debt, or €18.5 billion of the €20 billion, have signed the agreement that runs until February 2026.
Patrick Drahi's Plan B
While waiting to find an agreement, Patrick Drahi, advised by the Lazard bank, is rolling out his Plan B, which will be implemented if the billionaire and his lenders do not find a compromise. "XpFibre has been placed in a basket on which the management of Altice France could raise new debt, explains a banker. This would take priority over the old debt. » In short, to repay his nearest instalments, Patrick Drahi could borrow again, on the entity that owns XpFibre and create a new pyramid of debts. Rumors are swirling around the Apollo fund.
Timothée Gagnepain reminds us that in this negotiation, everyone plays their part. "There is a lot of bluffing, poker moves and an escalation in the manifestation of a balance of power but each side has an interest in finding an agreement, everyone wants to save their skin and leave with as much money as possible, it is a classic financial game." The first round of negotiations is now closed, the poker game continues behind the scenes.