Patrick Drahi ‘removes’ Altice Portugal from creditors’ reach

Patrick Drahi has just pulled the rug out from under Altice International’s creditors after removing its main businesses — including Altice Portugal (formerly Portugal Telecom) — from the set of assets that served as collateral for its debts, in a move considered “super aggressive” but aimed at stabilising the finances of the indebted telecommunications group.

As announced on Friday evening, not only Altice Portugal but also Altice Caribbean, which account for 80% of Altice International’s results, are now designated as “unrestricted” subsidiaries, meaning that they are no longer subject to the terms of existing credit agreements.

Until then, these two businesses had been given as collateral to creditors who hold more than €8 billion in the group’s securities. But now, without these restrictions, they are free to take on debt, sell assets or pay dividends without needing authorisation from creditors — which is already happening.

One of Altice Portugal’s units has secured €750 million in financing, which will be used to pay off the parent company’s debts and as working capital.

Altice International also signalled the possibility of raising a further €2 billion in additional debt through Altice Portugal, according to the same statement issued last Friday.

Debt securities plunge

The measure led to a plunge in the value of Altice International’s debt securities. On Monday, two of its subordinated securities fell from 35 pence to around 16 and 19 pence, respectively, the biggest intraday drop in their history.

“It’s super aggressive… Drahi has just taken five billion euros in value away from creditors”, one investor told the British newspaper Financial Times.

“After the market closed on Friday, Altice dealt creditors a harsh post-Thanksgiving blow by announcing the transfer of assets representing 80% of EBITDA for the last twelve months out of the restricted group”, wrote CreditSights analysts in a note quoted by Bloomberg.

“At this point, Drahi controls most of the cards, with little room for creditors to react strongly. We believe creditors are in a weak position — both because of the loss of assets and the highly uncertain valuations of all the group’s assets”, they added.

Drahi built an empire in the telecommunications sector through a series of debt-financed acquisitions. However, recent years have been marked by several conflicts with creditors as rising interest rates have hampered the Franco-Israeli tycoon’s ability to honour his commitments. The disputes have intensified this year.

Last week, Altice USA took legal action against the creditors holding most of its $26 billion debt, accusing them of illegal collusion to force the company into bankruptcy.

Previously, Altice France’s management had threatened investors with the possibility of transferring assets out of their reach, in a move similar to the one the group has now carried out at Altice International. However, earlier this year, Drahi ended up reaching an amicable restructuring agreement worth €24 billion, in a deal in which creditors took 45% of the company in exchange for a significant debt reduction of around €8.6 billion.

Altice Portugal up for sale again?

Among the measures announced at the end of last week, Altice International also revealed that it had begun a “strategic review of its asset portfolio”, in a process in which it “will evaluate potential divestment options in the coming years, with the aim of increasing financial flexibility and supporting broader capital structure initiatives”.

Drahi is currently working on the sale of French operator SFR, with the separate sale of the telecom’s assets on the table. In Portugal, he has just sold the data centre in Covilhã for €120 million, but the Financial Times reports that the Franco-Israeli magnate may relaunch the process of finding a buyer for Altice Portugal.

In July last year, ECO reported that the Saudis from STC had reached the final stage of purchasing Altice Portugal, but no agreement was reached with Drahi because of the price.