Altice's Creditor-Proof Refinancing: A New Benchmark in Liability Management

Altice's recent financial maneuvers represent a sophisticated, creditor-proof restructuring engineered through a series of interconnected debt moves. The core of the strategy began with a €586 million loan from Elliott Investment Management to refinance a relationship bank debt. This step was critical. Repaying that earlier loan removed the complex covenants and restrictions that would have complicated the subsequent asset shifts, effectively clearing the path for a major structural reorganization.

The next phase was a targeted asset transfer. Altice designated its Portugal and Caribbean subsidiaries as "unrestricted". This designation moved approximately 80% of the group's EBITDA outside the protective reach of its existing bondholders. The strategic impact is profound: these subsidiaries are now free to operate without the usual constraints that apply to the "restricted group" defined by the bond indentures.

This freedom is amplified by a new layer of financing. A subsidiary of Altice Portugal raised €750 million of new debt, which is structurally senior to the existing bondholders. This move not only provides immediate liquidity for working capital and debt service but also "primes" the bondholders, meaning future claims on these assets will be senior to the existing high-yield debt. Furthermore, Altice International has freed up capacity to incur €2 billion of additional financing at the Portugal level, creating a substantial pool of new capital that can be deployed without bondholder consent.

The foundation for this entire restructuring is a decade-long build-up of investment capacity. The company's debt documents contain a Restricted Payments build-up basket that has been accruing capacity for over a decade and is exempt from leverage ratio tests. This accumulated capacity, along with multiple other generous investment baskets, provides the structural flexibility to execute these moves without triggering the usual covenants.

The bottom line is that Altice has engineered a creditor-proof restructuring. By using a third-party loan to clear old restrictions, designating major subsidiaries as unrestricted, and leveraging a massive, pre-existing investment capacity, the company has moved a vast portion of its value and future financing power outside the reach of its existing bondholders. This is a textbook liability management exercise, designed to preserve control and strategic flexibility while avoiding a formal, court-supervised restructuring.

Elliott's Dual Role: Lender and Major Creditor

Elliott Investment Management's position in Altice is a masterclass in dual leverage. The firm is not just a passive investor; it is a key architect of the company's financial maneuvers. Its recent €586 million loan to a holding company was a strategic move to refinance existing debt and, crucially, to enable the subsequent designation of key subsidiaries as "unrestricted". This technical maneuver effectively moved those assets out of the reach of existing creditors, a classic liability-management exercise (LME) that prioritizes the company's liquidity over traditional creditor rights.

This creates a complex and powerful incentive structure. By providing the new capital, Elliott has secured itself a position as a senior secured lender with direct claims on the newly unrestricted assets. It is now both a funder of the company's restructuring and a major creditor in the new capital structure. This dual role gives Elliott significant influence over the outcome, as its own financial interests are directly tied to the success of the asset shifts and the company's ability to service its new debt.

The company's simultaneous lawsuit challenging lender cooperation agreements signals a new, aggressive phase in this battle. By filing a landmark suit accusing lenders of forming an "illegal cartel," Altice is attempting to break the unified front that secured creditors have built. This tactic, reminiscent of its earlier moves in Altice France, aims to force one-on-one negotiations and sow discord. The precedent set there is stark: in that restructuring, over €8.0 billion of funded debt was eliminated, with more than 90% of secured creditors ultimately accepting a massive write-off to allow a consensual deal. Elliott was a major player in that process, and its current position suggests it is now playing both sides of the table.

The bottom line is that Elliott's €586 million loan is a calculated bet on a specific outcome. It provides the liquidity for Altice to execute its aggressive LMEs while securing its own claim on the resulting assets. This positions the firm to potentially benefit from the asset shifts while also being a key creditor in any future restructuring. The simultaneous lawsuit is a high-stakes gamble to break creditor unity, testing whether the pattern of overwhelming write-offs seen in France can be repeated elsewhere. The incentives are now deeply aligned for a confrontation.

The Structural Arsenal: A Decade of Built-Up Capacity

The recent asset transfer at Altice International was not a desperate move but a calculated execution of a pre-built structural arsenal. The company's debt agreements contain a suite of provisions that have been accumulating capacity for years, creating a powerful toolkit for financial engineering that leaves high-yield bondholders with limited recourse.

The cornerstone of this arsenal is a Restricted Payments build-up basket that has been accruing capacity for over a decade. This €13.5 billion basket is a direct result of a specific covenant design: it is exempted from leverage ratio requirements for investments. In practice, this means the company could have been making large, unrestricted payments to shareholders or other affiliates for over a decade without those actions being counted against its debt covenants. This is a critical vulnerability for bondholders, as it allows for significant value extraction without triggering the usual financial distress signals.

Beyond the massive Restricted Payments basket, the debt structure provides multiple generous investment baskets that enable future "drop-downs" of assets. These include €700 million baskets and percentage-of-EBITDA carveouts across multiple provisions. These carveouts are not just for show; they are designed to allow the company to transfer assets to subsidiaries without needing creditor consent, effectively creating a legal pathway for value to exit the restricted group.

This structural flexibility enables a dangerous "double-dip" strategy. The company can first raise new debt at the subsidiary level-like the €750 million senior debt raised at Altice Portugal-and then potentially loan those proceeds back to the restricted parent group. This maneuver effectively injects new capital into the core company while keeping the debt off its own balance sheet, a move that is often prohibited under standard covenants. The designations of Altice Portugal and Caribbean as Unrestricted Subsidiaries are the first step in this process, moving approximately 80% of EBITDA outside bondholder protection.

The bottom line is that Altice International's debt agreements were structured to prioritize operational flexibility and shareholder returns over bondholder protection. The decade-long build-up of a €13.5 billion investment basket, combined with multiple carveouts and the ability to raise structurally senior debt at subsidiaries, creates a systemic vulnerability. High-yield bondholders are left with a portfolio that is increasingly exposed to a company that can, by design, extract value and restructure its debt layers without their approval.

The Credit Market Fallout and Investor Response

The market's verdict on Altice International's restructuring move was immediate and severe. Following the announcement on November 28, the company's bonds took a dive, with senior secured debt falling between six and eight points across its 2028 and 2029 maturities to the mid-60s. The 2027 notes, already under pressure, are currently quoted at 74.5. The subordinated bonds, which are structurally lower in the capital stack, fell even more sharply, dropping more than 16 points from the day before the announcement and now indicated at just 18. This price action quantifies the erosion of creditor bargaining power; investors are punishing the company for a move they see as a strategic reset that benefits the controlling shareholder at their expense.

The upcoming lender call on December 5 is a direct response to this shock. It brings together a steering committee of 11 major funds, representing about 87% of senior secured creditors, to discuss options. The meeting's purpose is to hear the SteerCo's assessment of the situation and consider next steps, including the potential for litigation. The most cited legal avenue is a change-of-control trigger, a provision that could force a debt acceleration if a significant asset sale is deemed a change in control. This signals that the creditor group is moving from reactive pricing to proactive defense.

The strategic context is critical. This move is a scaled-up version of what happened with Altice France in March 2024, but executed in Luxembourg's more flexible corporate framework. By moving Altice Caribbean, Portugal, and the Dominican Republic outside the restricted group and raising €750 million in new money against Portugal from a related party, management has effectively stripped the remaining restricted group of its most valuable assets. In the trailing twelve months to September, the dropped assets produced about 75% of group revenue and 80% of adjusted EBITDA. This aggressive asset stripping is a classic leverage play, designed to reset the company's financial profile and place it in a stronger bargaining position for upcoming debt talks.

The bottom line is that the credit market has responded with a clear penalty. The bond price declines reflect a loss of trust and a recognition that the controlling shareholder's options for deleveraging are now more constrained by the company's own actions. The December 5 call will test whether the creditor group can coalesce around a unified strategy to counter this move, or if the erosion of their position will force them into a more fragmented and costly defense.

Risks, Catalysts, and the Path Forward

Patrick Drahi's strategy is a high-wire act of financial engineering, and its sustainability hinges on a single, critical metric: cash flow. The recent refinancing from Elliott Investment Management is a tactical win, but it is not a resolution. The primary risk is a liquidity crunch if future asset sales or refinancing efforts fail to generate sufficient cash to service the company's mounting obligations. The entire maneuver is predicated on the ability to continuously unlock value from assets, a process that is becoming increasingly fraught.

The key catalyst to watch is the outcome of the New York lawsuit. This legal battle could set a precedent for challenging the very creditor cooperation agreements that Drahi's team is trying to navigate. A favorable ruling could provide a legal shield for future liability-management exercises, while an adverse one could severely restrict the company's options and force a more painful, court-supervised restructuring. The lawsuit outcome will be a major signal of the legal and regulatory environment in which Altice must operate.

The next major test is the conclusion of the strategic review. This process is not a mere inventory; it is a potential source of new capital. The review may lead to further asset sales or additional liability management exercises, each of which would provide a temporary cash infusion. However, each move also carries a cost. The recent drop-down of assets to incur new debt infuriated existing creditors, causing bond prices to drop to record lows. This reaction underscores the market's skepticism and the thin margin for error. Every new financing round that circumvents old debtholders risks alienating the very investors whose cooperation is essential for a long-term solution.

The bottom line is that Drahi's playbook is a series of stopgaps. The recent Elliott deal and the €2 billion capacity freed up provide breathing room, but they do not address the underlying problem of thinning margins and rising interest rates. The path forward requires monitoring two things: the legal precedent set by the New York case, and the tangible results of the strategic review. If the next round of asset sales or refinancings fails to generate the expected cash, the liquidity crunch risk will become immediate, not hypothetical.