Altice looks to borrow for first time since co-founder’s arrest

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Troubled telecoms group Altice is looking to borrow €500mn from investors, marking its first foray into debt markets since one of its most senior executives was arrested as part of a corruption probe.

Franco-Israeli billionaire Patrick Drahi stitched together Altice through a series of debt-fuelled acquisitions over the past decade, but concerns have been mounting over its $60bn in borrowings as rates rise. The scandal involving the group’s co-founder Armando Pereira, who was placed under house arrest in Portugal in July, has further spooked debt investors. 

The criminal investigation centres on whether the 71-year-old executive worked with others to rig Altice’s procurement processes, with allegations that hundreds of millions of euros appeared to have been siphoned off illicitly. Altice has suspended a string of other senior executives around the world in the wake of the corruption probe. Pereira has previously denied wrongdoing.

On Wednesday, Altice International announced it was looking to borrow €500mn in the leveraged loan market, in order to repay bonds that are set to mature in 2025. The company, which has operations in Portugal, Israel and the Dominican Republic, is one of Altice’s three main silos, alongside Altice France and Altice USA.

Altice International is widely seen as having the stronger credit profile of the three groups. It has a net debt to ebitda ratio of 4.8 times — albeit based on heavily adjusted earnings — compared to 5.2 times at Altice France and 6.7 per times at Altice USA.

Altice is proposing an interest rate of 5 percentage points over a floating rate benchmark, while offering investors a discount to face value equivalent to 96 cents on the euro on the four-year loan.

For Altice, this equates to an all-in double digit annual cost. Leveraged loans are largely bought by institutional investors and special purpose vehicles known as collateralised loan obligations.

While Drahi last month stated that his main focus was dealing with the group’s upcoming maturities, he has also been exploring asset and equity sales to raise money.

Drahi is seeking to potentially raise around €3bn through the sale of a minority stake in Altice France, according to bankers, who added that financial investors rather than rival telecoms firms are the most likely buyers.

Investment banks including Lazard, Goldman Sachs, Morgan Stanley and BNP Paribas have also been appointed to sound out sales for the group’s data centres in France, telecoms operations in Portugal and the Dominican Republic, and video advertising business Teads.  

In the wake of Pereira’s arrest, Altice’s management has been trying to assuage debt investors’ concerns over the sustainability of its $60bn and distance itself from the allegations against the group’s co-founder.

On a call with investors last month, Drahi described the alleged fraud as “a shock and as a huge disappointment”.

“If the allegations are true, I feel betrayed and deceived by a small group of individuals, including one of our oldest colleagues,” he added.

Pereira’s arrest has been particularly sensitive for Drahi, not only because he was long seen has his trusted right-hand man, but also because the two men’s finances have long been intertwined. On the same investor call, Drahi confirmed that he had an agreement that handed the Portuguese executive “a carried interest of around 20 per cent of my personal economic interest” in Altice.

Drahi, who typically leaves day-to-day investor relations to his lieutenants, has spent the past two months meeting with key lenders in a bid to allay their concerns. Earlier this month, Goldman Sachs hosted a “fireside chat” where Drahi spelt out his road map for reducing Altice’s debt pile, while arguing that the so-called “price war” in French telecoms is abating with further market consolidation increasingly likely.

BNP Paribas and Goldman Sachs are leading Altice International’s loan deal, with commitments from investors due by October 2.