Altice's Drahi Repositions Assets, Pushing Creditors to Back of Debt Line

Billionaire Patrick Drahi Escalates Battle with Creditors

Billionaire Patrick Drahi is escalating a high-stakes battle with creditors of his Altice telecommunications empire, using a series of aggressive financial maneuvers to restructure the company and shield key assets from lenders. The latest move involves Altice International, which recently designated two major subsidiaries as "unrestricted," effectively removing them from the reach of existing creditors. The telecom giant also raised €750 million in new debt and secured an additional €2 billion in funding, further pushing outstanding loans and bonds to the back of the repayment line according to Bloomberg.

The actions have sent shockwaves through the credit markets, with Altice International's bonds plummeting to record lows as investors scrambled to assess their options. Drahi, known for his acrobatic debt strategies, has been leveraging liability-management exercises to restructure out-of-court, a tactic that has increasingly left creditors with substantial losses. The situation mirrors ongoing struggles in other parts of his global empire, including Altice USA, where the company recently rebranded to Optimum Communications and launched a landmark antitrust lawsuit against key lenders.

This is the third major financial offensive by Drahi against creditors in just two years, marking one of the largest asset repositioning efforts in Europe. The billionaire founder has built his telecommunications conglomerate through a decade of aggressive acquisitions, often funded by cheap debt. However, as rising interest rates and shrinking profit margins have strained the business, Drahi has turned to unconventional restructuring methods to maintain control. His latest actions have left many in the credit community questioning the long-term stability of his debt-laden empire according to Bloomberg.

Why the Standoff Happened

Altice USA's legal battle with its creditors has taken center stage, as the company accused Apollo, Ares, and BlackRock of forming an "illegal cartel" through a cooperation agreement. The agreement allegedly barred one-on-one negotiations unless two-thirds of the creditors gave consent, effectively freezing Optimum out of the U.S. credit market. The lawsuit, filed in a New York federal court, marks a significant escalation in the dispute and could set a precedent for future cases involving cooperation pacts among creditors according to The Star.

The cooperation agreement has become a common tool for creditors seeking to strengthen their leverage in corporate debt negotiations. However, Altice USA's legal team argues that the pact violates antitrust laws by stifling competition for the company's debt. The lawsuit is being managed by Kellogg, Hansen, Todd, Figel & Frederick, a law firm known for its expertise in antitrust litigation. Kirkland & Ellis and Evercore Inc. are also advising Optimum on its capital structure reorganization.

How Markets Reacted

The market response to Drahi's aggressive restructuring moves has been swift and severe. Altice International's unsecured and secured bonds have plunged by record margins in the days following the designation of the two unrestricted subsidiaries. Investors are now scrambling to assess the implications of the move, with many holding calls with legal and financial advisors to evaluate their next steps. The drop in bond prices underscores the growing uncertainty surrounding the viability of Drahi's strategy and the potential for further losses among creditors according to Bloomberg.

In parallel, Altice USA's rebranding to Optimum Communications has not shielded the company from its financial challenges. The firm recently used a newly designated unrestricted subsidiary to refinance a $1.9 billion term loan two years early, a move that has raised eyebrows among analysts. The repayment of this loan, which carried some of the tightest investor protections in the structure, signals a broader strategy to reduce the influence of creditors while securing favorable terms for new debt according to Bloomberg.

What Analysts Are Watching

The legal and financial battles surrounding Altice have drawn significant attention from market analysts and legal experts. Benoit Soler, a high-yield fund manager at Keren Finance, has criticized the leniency shown to private equity and aggressive owners in recent years, arguing that bond documents have been too permissive. He suggests that the current standoff reflects a broader systemic issue in the debt market, where creditors are often at the mercy of powerful borrowers according to Bloomberg.

Legal scholars and market observers are also closely watching the outcome of Altice USA's antitrust case. Samir Parikh, a law professor at Wake Forest School of Law, notes that while the argument that a cooperation agreement violates antitrust law has a low probability of success, the case could still have far-reaching implications. If the court rules in favor of Optimum, it could reshape the landscape of creditor cooperation agreements and influence future debt restructuring efforts according to The Star.

The situation highlights a growing trend in corporate debt markets, where borrowers are increasingly using creative legal and financial strategies to protect their interests. Drahi's actions represent a bold test of the boundaries of what is permissible in out-of-court restructurings. The outcome of these battles could have lasting effects on the balance of power between borrowers and creditors, potentially altering the rules of engagement in future debt negotiations.