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The price action on Altice France (SFR) debt following the company’s fourth quarter earnings has dramatically punctured trading prices and quotes in its bonds and loans, both of which are held broadly across CLO funds.
Altice wowed nobody with today’s presentation, which inspired a sell off across its bonds and deep cuts to quotes on its term loan debt. Of particular concern was the stated intention to take measures to cut leverage to below 4x Ebitda. This has raised the spectre of haircuts from par on outstanding notes. See the appraisal of my colleagues Nathan and Yusuf here.
Said Dennis Okhuijsen, CFO, on the call: "To achieve this deleveraging level of below four times, we think this requires creditor participation in discounted transactions, which could include exchange offers or tenders or repurchases. We continue to evaluate the alternatives and the options to get to this below four times leverage.”
This was in response to a question from an attendee expressing skepticism on Altice’s priorities to dispose of assets, since it has not shown the benefits of these plans on its balance sheet — “implying as if it was a full value leakage”, according to the caller.
The response: a meltdown — and not just bonds and loans but also (from sources) some of the investors holding the bonds, particularly the unsecured ones.
Altice France 4% 2028 senior unsecured notes were the worst hit in the ensuing bond carnage, dropping from above 59 to below 41. This totally undid all the gains the notes had made since early February, and dropped even further below those previous low levels in the 42 cent area. The yield to worst on the notes spiked above 31%, having started this week below 19%.
The May 2027 SUNs also had a massive fall, dropping to down to 47 cent area, but so did the company's 2029 SSNs, which fell 10-12 points.
The October 2029 notes are widely held, with managers like Allianz (€42.5m) and BlackRock (€36m) topping the pile, according to Bloomberg data. Jupiter Asset Management also holds a big chunk of those (with third most exposure) and also tops the manager holdings stack for the 2027s, with a share of around €233m as well as €26m of the 2029s. CLO manager names are dotted throughout the holdings tables of both notes, suggesting some were either slow to get out before previous declines, or have bought them up opportunistically on hopes of a bounce.
Quotes on the bank debt have similarly been deeply cut. Both US dollar and euro term loan B tranches maturing are being quoted down several points, according to recent trader runs.
CLOs hold a huge amount of these, with Octagon (on about $265m across deals) having the largest exposure to the dollar TLB and Investcorp (€71m) to the euro TLB, according to 9fin data.
These loans had previously been rising in price continuously since mid-December, when they were around 85.
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