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Goldman Sachs has tried to cut its debt exposure to Altice, the French telecoms and cable group whose share price has more than halved in the past month, in the latest sign of nervousness about the company’s €51bn debt pile.
Goldman Sachs has been one of the biggest lenders to Altice and its founder, Patrick Drahi, over the past five years, providing the Franco-Israeli billionaire’s private investment vehicles with margin loans and other debt facilities in the run-up to the group’s initial public offering in 2014. The US bank has also been one of the main beneficiaries of investment banking fees paid out by Altice in the past few years as it embarked on an acquisition spree in France, Portugal and the US.
As concerns grew about the company’s performance in November, Goldman Sachs approached several funds in an attempt to sell part of a loan it had previously made to Altice, according to persons familiar with the matter. The US bank’s attempt to sell on this debt suggests that the price collapse of the heavily indebted company’s public shares and bonds is starting to rattle some of its core lenders.
Goldman Sachs and Altice declined to comment on the matter.
“The banks with very large exposures are nervous,” said one senior debt banker.
Goldman Sachs is one of the main lenders to Altice’s “topco” — the entity at which its Netherlands-listed shares sit and which has more than €2.3bn of debt. In contrast to most of Altice’s €51bn debt, this has never been publicly syndicated to institutional investors and sits on the balance sheets of what the company calls its “relationship banks”.
One credit fund manager said that Goldman Sachs “tried to syndicate their topco debt” in November, which he said had made funds that the bank approached over a potential debt sale more concerned about the group’s finances.
“I think for a lot of people it was a big warning sign,” he said. “Goldman clearly blinked on it, as they can be a bit more pre-emptive [than other banks] in how they handle their credit risk.”
Altice increased this topco loan facility by €950m in August, meaning its banks took on additional exposure just a few months before the company’s shares and bonds came under significant pressure.
Altice has pledged to cut its debt by selling non-core assets and turning round operations in its largest market of France. The group has repeatedly tried to assert that it is financially stable despite the decline in its share price, pointing out that it has no significant debt maturities coming up for renewal until 2022.
The banker added that Altice’s larger lenders have also provided private financing to Mr Drahi himself, adding to their overall exposure to the group.
“That’s the other side of the coin, which is not public: just how leveraged Drahi is personally,” he said.
The company publicly announced in November that Next Alt — Mr Drahi’s main investment vehicle — does not have “any margin loan exposure to Altice”, in an attempt to reassure investors about the impact of the founder’s private debt.
But Goldman Sachs two years ago provided Next Alt with a “funded collar” facility — a complicated derivatives options trade on Altice shares — that was used to repay margin loans and other debt that the US bank had earlier lent to Mr Drahi’s investment vehicle.
This collar facility is still outstanding, meaning that Goldman Sachs is exposed to a fall in the share price, which has fuelled concerns that it could force the bank to sell Altice shares. Altice said that this speculation is “unfounded”, however, as under the facility the US bank has in fact been a “natural buyer as the shares have traded lower”.