Altice: pressure mounts for Drahi to sell BT investment
Selling the investment in the UK telecom would not garner much for the Altice group owner
Patrick Drahi avoids public appearances. When the French telecoms tycoon speaks up, people tune in to hear what he sounds like as well as what he has to say. A criminal investigation into business partner Armando Pereira and steep debts prompted him to address investors on Tuesday.
They were modestly reassured. But actions will speak louder than Drahi’s confident performance.
Drahi’s Altice group has such steep borrowings that asset sales are needed. One holding which might fit the bill is a 24.5 per cent exposure to UK telecom BT Group that includes a big chunk of cash equities.
Drahi did not need the headache of a probe into alleged corruption, of which he denies all knowledge. His Altice companies — Altice France, Altice International and Altice USA — have some $60bn of net debt outstanding. The largest part is owed by the private French company. Its bond prices have sunk well below par. Altice France’s 8 per cent 2027 euro-denominated trades at just under 45 cents to the euro.
The company announced ho-hum second-quarter earnings. Bondholders were more interested in whether Altice France can sell French data centres. But this would raise little more than €1bn. Altice France alone holds about €30bn of net debt, over six times trailing ebitda.
That brings us back to BT. Excitable analysts have speculated whether Drahi wants to buy the whole business. In reality, he could not afford to cover the £31bn enterprise value. Altice International, less leveraged than Altice France at 4.6 times net debt to ebitda, only provides some £300mn annually in dividends to him, thinks fund manager Federated Hermes.
Selling the BT investment would not garner much. At current prices BT is worth £2.7bn to Drahi, assuming the exposure is overwhelmingly in shares. Traders’ gossip is that he has borrowed heavily against the investment. That might leave little more than half a billion pounds of actual equity.
Investors might also read a sale as a sign of desperation. Drahi’s investor call appearance already hints at that.