Altice International, a prominent telecommunications provider, has undertaken an aggressive financial maneuver to shore up its stability, drawing significant attention from creditors and market observers. The company announced on Friday that it has reclassified two key operational units—Altice Portugal SA, which encompasses all its Portuguese operations, and Altice Caribbean Sarl, housing its activities in the Dominican Republic—as “unrestricted subsidiaries.” This designation fundamentally alters their financial governance, exempting them from the stipulations of existing financing agreements. Consequently, these units now possess the autonomy to incur new debt, divest assets, or distribute dividends without requiring consent from their current lenders.

Simultaneously with this strategic reclassification, a division within Altice Portugal has successfully raised €750 million ($870 million) in new debt. This capital infusion is intended to address upcoming liabilities for Altice International and to bolster general working capital. Furthermore, the company has indicated the potential to raise an additional €2 billion in debt at the Altice Portugal level, a move that would further enhance its liquidity position amidst its significant financial challenges. Altice International is grappling with a substantial net liability stack totaling €8.7 billion, making such aggressive financial engineering a critical, albeit controversial, strategy to manage its debt burden.

Industry analysts have quickly weighed in on the implications of this move, known as a “drop-down.” Aidan Cheslin, head of European credit research at Bloomberg Intelligence, characterized the founder Patrick Drahi’s action as a “game of asset Jenga” that places Altice International’s creditors in a precarious situation, potentially pushing them towards a restructuring scenario. The decision to detach these core assets leaves the remaining “restricted group,” primarily comprising its Israeli operations, with an alarming annualized net debt-to-Ebitda ratio of 26x. The market immediately reacted to this news, with Altice International’s 5.75% dollar-denominated bonds due in August 2029 experiencing a decline of over 7 cents, trading below 67 cents on the dollar, according to Trace pricing data.

In anticipation of potential debt negotiations, creditors have begun to organize. Altice International has responded by appointing three independent members to its board, a move aimed at addressing governance concerns. The company also clarified that Altice Caribbean is now held by a direct subsidiary of Altice Group Lux Sarl. Beyond these financial restructuring efforts, Altice International announced a comprehensive strategic review of its entire asset portfolio on Friday, signaling its intent to assess potential disposals over the coming years as part of a broader strategy to streamline operations and strengthen its financial standing.

These developments unfold against a backdrop of challenging third-quarter financial results for Altice International. The company reported a 12.1% year-on-year drop in earnings, despite achieving a 4.2% growth in revenues. This disparity in performance was attributed to the nature of the growing revenue streams, which are characterized by lower profit margins, coupled with an increase in overall operating costs. These financial pressures underscore the urgency behind Altice International's aggressive strategies to stabilize its balance sheet and navigate its considerable debt obligations.