Faced with his mountain of debt, Patrick Drahi is engaged in a muscle game with his creditors
After Casino and Atos, a new financial soap opera is emerging. And, given the stakes are four to five times higher, the story promises to be even more compelling. Altice France, the group owned by Patrick Drahi, owner of telecoms operator SFR, launched a debt restructuring operation last week that will peak at 24.3 billion euros at the end of 2023.
For Altice, this level is unsustainable while SFR has been losing millions of customers every quarter for the past year and a half. During the presentation of the results of Wednesday March 20, 2023, a telephone meeting in which Patrick Drahi did not participate, the management of the group explained schematically that the debt would have to be reduced to a level of about 16 billion euros to ensure sustainability. 8 billion less than the future, or present, for the operator.
But to achieve this, he has warned lenders that they will have to write off part of their debt, meaning a loss of around 30%. An investor who would have lent 100 to Altice France may find himself with only 70. Altice says it is ready to contribute to this debt reduction plan using two billion euros received from the sale of data centers and BFM-TV. But provided that the lender agrees to make the requested effort.
Defined hedge funds
Altice France’s creditors, mainly funds specializing in risky debt (hedge funds), thus did not expect such an announcement, and find it particularly hostile – some do not hesitate to speak. “Blackmail”. As the alleged corruption case targeted his former partner, Armando Pereira, Patrick Drahi promised that he was willing to sell some of his companies, including SFR, to pay off his debts. After last week’s statements, creditors fear the businessman will use proceeds from the sale of data centers and BFM-TV to pay dividends to his individual holding companies.
Hedge funds are determined not to let that happen. To bring together a common front, many of them hired investment bank Houlihan Locke as well as law firms Milbank and Wilkie Farr, debt restructuring specialists. A sign of their consolidation: more than five hundred creditors joined during two telephone meetings organized on Friday March 22 and Saturday March 23, to understand the legal mechanisms of the file that promises to be particularly complex, between the Dutch and Luxembourg holding companies, an Altice company. Most debt registered in France and under American law.
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