Apollo and Oaktree sue Patrick Drahi over US telco restructuring
Bondholders argue that restructuring at Optimum Communications was ‘brazen’ move
Creditors including Apollo Global Management and Oaktree Capital have sued Patrick Drahi over a debt restructuring at his US telco, arguing that the French billionaire is “personally liable” for a “brazen” plan to move the company’s most valuable cable television assets away from the reach of bondholders.
The lawsuit from a group of bondholders is the latest salvo in a battle between Drahi and some of the biggest credit funds in the world, with both sides jockeying for control of a company that has pay-TV operations across the US.
Optimum Communications, the former Altice USA, struggled for years with debts of more than $20bn, including $6bn of bonds coming due in 2027.
“The Company is hopelessly insolvent and has been for some time — a direct and inevitable result of Drahi’s infamous business strategy, the ‘Altice Way’,” wrote the bondholders in a complaint filed in a New York State court late on Monday.
Optimum announced in June that it had moved its Cablevision business, representing millions of lucrative pay-TV customers in the New York City region, into a so-called “unrestricted holdco”, on which creditors did not have a claim.
That new entity raised $3bn of senior debt from JPMorgan Chase and $300mn of junior preferred equity from investors outside the existing Optimum creditor group. Optimum said at the time that it hoped that the restructuring would prompt settlement talks with creditors who face taking steep discounts on the face value of their debt.
The battle over Optimum is being closely watched on Wall Street because of its size and the personalities involved but also for potential precedents that could influence future fights over distressed debts.
Altice has separately sued the bondholder group for forming what it said was an “illegal cartel” over a pact among the creditors to only negotiate a restructuring with Optimum as a unified bloc. The bondholders have denied those claims and have sought to dismiss the lawsuit.
As asset owners, groups such as Apollo and Oaktree have also historically made restructuring moves similar to the ones deployed by Drahi. In the Optimum case, the creditors have argued in court filings that creditor-on-creditor violence had harmed US capital markets and should be discouraged.
The complexities of large banking groups have also been exposed in the case. JPMorgan’s asset management group is a bondholder and a plaintiff in Monday’s lawsuit, while JPMorgan’s commercial bank has been a lender to Optimum in the new “unrestricted holdco” restructuring that is being challenged by creditors.
Optimum said the bondholders’ allegations were “without merit”.
“The actions the company has taken to protect and maximise stakeholder value were conducted in full compliance with its existing debt agreements and applicable law,” it added.
JPMorgan and Drahi did not immediately respond to requests for comment.