Altice International - Recapitalisation options

All,

Please find our updated analysis of Altice International here.

We look forward to sharing a more detailed note post the Q2 numbers later this month, but some of you have requested a recapitalisation table, which we share in this analysis. As evidenced by current trading levels, an imminent restructuring may be upon us. However, we issue a word of caution on this, noting that Altice International have sufficient liquidity to meet upcoming maturities in January 2026, leaving any restructuring proposal to H1 2026, in advance of the maturity wall in late 2027. 

Investment Rationale:

- We are maintaining our 5% long position in Altice International subordinated bonds. We acknowledge this is a high-risk position, and we may revisit our positioning post Q2 numbers. 

- Altice looks unable to refinance their commitments due in 2027, requiring at least some heavy liability management, or else a full restructuring. Taking as a blueprint the SFR agreement, we expect Sr. Secured creditors to take a haircut of 15%, but without having to commit additional cash. In return, we’d expect them to receive approx. 1/3 of the equity. If a deal fails and the transaction has to be non-consensual, then we’d expect the company will need fresh cash, which would buy equity. Participating SSNs would eventually recover the same amount, but it would involve more time and risk and a significant cash outlay. Non-participating SSNs would be worse off.

- The SUNs are out of the money and would not survive a restructuring. However, in return for agreeing to a consensual deal and in light of their relatively small size, they can extract considerable nuisance value and receive 10% of a reset equity that would be balanced at the company’s new debt carrying capacity. 

- Altice International could reap significant upside from peace in the Middle East, which could lift the value and profits of its Israeli business.

Recapitalisation Table:

- The Debt-Carrying Capacity of Altice International is c. €7bn, which does not cover the outstanding Senior Secured debt, resulting in a c.€1.5bn write down. Additionally, the Unsecured would be fully written off. We are assuming that the remaining Senior Secured debt will be issued with market rate coupons, but acknowledge there could be a play-off between debt write-down and future coupons. 

- As the business does not need new cash, the deal becomes an Amend & Extend for the Senior Secured Creditors. Our initial scenario assumes an 18% write-down of the senior Secured debt, with a 100% write-down of the Unsecured bonds. However, this scenario assumes no asset sales, which could generate cash proceeds to make a partial paydown of debt. 

- We will revisit the potential for asset sales, including the potential leveraging of FastFiber, which may provide the Company with the option to make a partial payment on outstanding senior debt. 

Recent Results:

- Our main takeaway from the Q1 conference call was the confirmation that Altice International was in discussions to sell a stake in its Israeli operations to deleverage its balance sheet. The Company also confirmed there would be no dividend to the parent Company in FY25. 

- EBITDA has continued to decline, mainly driven by reduced activity in the Altice Labs segment. Despite the increased competition in the Portuguese market, Altice International appear to be able to maintain its customer base. Revenue increased, although this is driven by its energy offering (in conjunction with telephony). Cash flow has shown a modest increase. 

- No mention of an Altice SFR-type transaction on the Q4 and FY24 call. Revenue is marginally down for the year, EBITDA 3% lower at €1.6bn. Some of the underperformance in EBITDA is explained by the loss of revenue and EBITDA in the Altice Labs segment, where EBITDA fell from €90m in FY23 to c. €45m in FY24.EBITDA will decline further in FY25 but on a slower basis. The Company did not provide any guidance. Altice management is in control of the timings of any transactions with no major maturities until FY27. 

- Net Leverage is 5.5x at year-end, and pro forma liquidity is €1bn. The Teads transaction closed in February but was adjusted downwards by $100m for the underperformance of the business in H2'24. The Outbrain stock, which Altice also received, has deteriorated significantly, with Altice’s stake now worth c. $100m. 

- Separately, the Company disclosed a small infrastructure disposal in Portugal, which yielded €60m of proceeds in March. Management confirmed no dividend or intercompany loans were paid/extended in Q424 or Q125. 

Happy to discuss. 

Tomás

E: tmannion@sarria.co.uk
T: +44 20 3744 7009
www.sarria.co.uk