Patrick Drahi’s ‘super aggressive’ asset move hits Altice International bonds
Franco-Israeli tycoon has locked horns with creditors over debt-laden telecoms empire
Bonds issued by part of billionaire Patrick Drahi’s heavily indebted Altice telecoms empire plummeted on Monday, after he moved the bulk of the group’s assets out of creditors’ reach.
The “drop-down” transaction, announced late on Friday, shifted Altice International’s Portuguese and Dominican assets out of creditors’ pool of collateral — assets they can call on if debt is not repaid — and designated them as “unrestricted” subsidiaries.
Those assets, Altice Portugal SA and Altice Caribbean Sarl, account for about 80 per cent of Altice International’s earnings. Until Friday, they had been pledged as security to creditors who own more than €8bn of the group’s bonds.
“Its super aggressive . . . he’s just taken €5bn of value from creditors,” said one credit investor.
Some of Altice International’s most senior debt fell as much as 12 per cent on Monday morning, from 75 cents on the euro to 66 cents. Two of its junior bonds fell from around 35 cents on the euro to just over 16 and 19 cents respectively, their largest-ever intraday drop.
Drahi, a Franco-Israeli tycoon, has built a sprawling telecoms empire through a series of debt-fuelled acquisitions over the past two decades.
He has been in conflict with creditors in recent years as interest rates have risen and his debts have come due for renegotiation.
Friday’s transaction follows Altice USA’s decision last week to sue lenders holding the bulk of its $26bn debt, accusing them of illegally colluding in an attempt to force the company into bankruptcy.
Altice France’s management angered bondholders last year by raising the prospect of aggressively shifting assets away from them — in a similar move to Friday’s transaction by Altice International.
But Drahi eventually struck an amicable €24bn restructuring deal with creditors of his French business in February. The deal involved handing a 45 per cent stake in the company to creditors in exchange for a substantial debt writedown.
However, at the time some analysts and investors believed bondholders were at greater risk of asset stripping at Altice International than at Altice France, because French law prevented Drahi from taking the most aggressive course of action at the domestic business.
As well as moving the assets away from existing creditors, Altice Portugal had already raised €750mn of new debt through “a private financing transaction” to pay upcoming liabilities of Altice International, as well as for general working capital purposes, the company said on Friday.
Altice International also said that it could raise another €2bn of new debt at Altice Portugal to follow the transaction.
As the assets moved out of creditors’ reach on Friday are now no longer governed by Altice International’s existing credit agreements, they can also be sold or used to pay dividends without needing creditors’ permission.
Drahi — who is currently working on the potential sale of Altice’s French operation, SFR — is expected to restart a process to find a buyer for Altice Portugal in due course.