JPMorgan takes fire in Patrick Drahi’s war
In the distressed debt wars, big banks typically like to play Switzerland.
Money centre financial institutions are busy trading with, lending to and advising big private equity firms and hedge funds, with the total annual fees they earn from this work reaching into the hundreds of millions of dollars.
With so much business on the line, they’re too occupied to go belligerent.
But in serious scrapes, is it even possible to avoid being drawn on to the battlefield? DD’s Eric Platt and Sujeet Indap on Friday told the story of JPMorgan Chase, the biggest bank in the US, taking heat for getting in the middle of the blood sport at Patrick Drahi’s telecoms group Altice USA.
The House of Dimon recently lent $2bn to Altice, which is struggling under the weight of $26bn of debt. But in the course of that messy transaction, collateral that other creditors — Apollo, Ares, Oaktree, BlackRock and hundreds of others — had depended on was moved outside their reach. The JPMorgan financing also torpedoed the covenants creditors had previously secured.
Those creditors are now furious with JPMorgan for enabling what they see as so-called creditor-on-creditor violence, when lenders go at each other as a way of improving their own returns.
The JPMorgan loan isn’t an unusual tactic. But the key difference is that it’s typically executed by a private capital firm such as Angelo Gordon or Centerbridge; not a regal white-shoe bank that claims the ethos of doing “first-class business in a first-class way”.
Of course, we wonder if hard-edged private capital firms should be the judges of decorum. Adding to the hostilities, Kirkland & Ellis is taking fire for its role in the wheeling, dealing and suing going around at Altice.
Expect the parties to be consulting their office copies of The Art of War looking for advice on what to do next.