Wed 03/20/2024 14:17 PM
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Relevant Documents:
Q4 Press Release
Q4 Presentation

French telecommunications and media company Altice France’s 8% 2027 senior notes dropped about 20 points today after management said on the group’s earnings call that it intends to hold back disposal proceeds until it is able to assess all options that can be taken to accomplish its new deleveraging target. A change of tone from controlling shareholder Patrick Drahi’s confident deleveraging commitment last August.

Management did not exclude some debt impairments to achieve its new net leverage target below 4x. It also confirmed that the datacenter company, UltraEdge, was designated as an unrestricted subsidiary. The bond documents allow the group to dispose of the shares or other securities of any unrestricted subsidiary without being subject to the asset sale covenant.

While some investors noted that discounted transactions, consisting of exchange offers, tender offers or debt repurchases, have been done before, a scenario where debtholders could be impaired and the designation of UltraEdge as an unrestricted subsidiary came as a surprise for some. This followed the announcement last Friday of the sale of Altice Media, which the group also declared it has designated as an unrestricted subsidiary.

The expectation had been that Altice France would have used the proceeds from the sale of UltraEdge to repay its term loans, in line with the terms of the amend-and-extend transaction in January 2023, as summarized in the investor presentation and in Reorg’s waterfall analysis. During the group's third-quarter earnings call, one analyst had also noted that Altice France’s 2027 term loan has a provision forcing the borrower to use the net proceeds to repay senior secured debt within 30 days of receipt.

Buysiders said the group’s move was not transparent and suggested that it might have been meant to shake market sentiment and cause bond prices to fall to achieve the maximum benefits for bond buybacks and tender offers. The negative 2024 guidance served that purpose as well, with one investor adding that the guidance looks too conservative.

During the call, market participants expressed frustration around value leakage as illustrated by the pro forma net leverage of 6.2x as of Dec. 31 reported by the group. The adjusted EBITDA was presented pro forma for the sale of a 70% stake in UltraEdge and the sale of 100% of Altice Media, resulting in a €170 million decrease in the last two quarters annualized, or L2Q, EBITDA to €3.917 billion, versus a marginal €71 million decrease in net debt to €24.315 billion.

The call participants asked what led the group to revise the target leverage considering that the macroeconomic picture has not materially changed since August. Management argued that in light of the challenging business and financing environment, and Altice’s growth and cash profile, it feels more comfortable with a medium term net leverage target of “well below” 4x, a revision from the prior 4.5x target.

Management confirmed that XpFiber, in which Altice France has a 50.01% stake, and La Poste Telecom, in which Altice France has a 49% stake, are the other assets under review for sale, and there are other smaller assets that are “still pending”.

The group’s €1.317 billion 8% 2027 notes were quoted at 46/49 today, down more than 20 points from the previous day’s close, while its €500 million 4% 2028 notes dropped 17 points to 41/44, according to sources. The group’s $1.75 billion 8.125% 2027 senior secured notes slid 10 points to 83.75/85.25, sources said.

Altice France did not reply to a request for comment.
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