Drs P. schreef op 19 november 2017 18:07:
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The €51bn debt at the heart of Altice
Altice’s debt-raising strategy is similar to John Malone’s Liberty Global, where Patrick Drahi began his career and chief finance officer Dennis Okhuijsen was previously treasurer, writes Robert Smith in London.
Like Liberty, Altice splits its €51bn of debt across several distinct “silos”, which means bond fund managers are less likely to run into credit concentration limits that restrict them from owning too much debt from one company.
But unlike Liberty, Altice also has debt at holding companies that sit above multiple operating companies, such as the €6.2bn of debt at the Altice Luxembourg entity that controls the company’s French and international businesses. Investors have long expected Altice to “push down” this debt into the operating companies in order to more closely mirror Liberty Global.
“What bondholders want to see is what shareholders want to see: execution, top-line stability, and, in particular, delivering,” says Mitch Reznick, co-head of credit at Hermes Investment Management. “This means that shareholders’ and creditors’ interests are aligned for the moment, because the path to shareholder remuneration in the coming months is for Altice to do the kinds of things that bondholders want to see.”
Several bond investors say that there is now confusion over Altice’s plans for the holding company debt, after Mr Okhuijsen last week outlined several contrasting options that could be used to “simplify” the company’s structure.
These comments caused the cost of buying five-year credit-default swaps (CDS) on Altice Luxembourg’s debt to surge from 175 basis points to as high as 500 basis points. This is because traders who had bet on the derivatives contracts becoming worthless — because the underlying debt would be retired — had to unwind their positions.
One Altice bondholder says that this CDS move had hit his fund, but added he was not worried about the long-term outlook for the company’s debt.
“Most of the bonds are still trading above par even after the leg down [on Tuesday], so there doesn’t seem to be a concern that this is a ‘house of cards’ type situation,” he says. “Unlike some other roll-ups their ‘like for like’ disclosure has always been very good, so while they’re an M&A heavy business they haven’t been using this distort operating numbers.”
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