Altice International Asks Creditors to Send Copy of Cooperation Agreement

Altice International has asked a group of secured creditors to provide the cooperation agreement that binds them to act collectively before any negotiations on a potential balance-sheet restructuring, citing the pact’s restriction on direct lender-company talks. The company also requested the identities of each creditor, whether a steering committee exists, and the size of individual and aggregate holdings, signaling scrutiny of creditor coordination ahead of restructuring discussions.

Analysis

Market structure: The secured creditors who formed a cooperation agreement are the immediate winners — they gain concentrated bargaining power to extract haircuts or control takeovers, while unsecured bondholders and equity holders in Altice and similarly levered European cable/telco credits are clear losers. Expect immediate repricing: senior unsecured and high-yield spreads for comparable issuers to widen 100–300bps in days as liquidity for levered cable names dries up; IG corporates and core govvies (TLT/IEF) should tighten as safe-haven flows increase.

Risk assessment: Tail risks include a cramdown or prepack that materially resets equity to zero and forces cross-defaults across affiliated issuers, or protracted litigation that reduces recoveries by >20% — low probability but high impact over 3–12 months. Near-term (days–weeks) key risks are disclosure-triggered rating downgrades and CDS jumps; long-term (quarters) risks are collateral reallocation and contagion to bank loan funds (BKLN) if enforced sales occur. Hidden dependencies: intercompany guarantees and pledged asset pools can amplify losses across jurisdictions.

Trade implications: Direct plays: buy downside protection on HY via HYG/JNK puts and size CDS on Altice/peers if available; pair trades: long LQD (or IG corporates) and short HYG/JNK to capture IG–HY spread widening over 1–6 months. Options: consider 3–6 month HYG 5–10% OTM puts or put spreads; rotate out of EUR B/CCC telco bonds and into IG duration (LQD/TLT) while hedging with HY shorts. Act quickly for hedges (1–4 weeks); directional restructurings require 3–12 month horizon.

Contrarian angles: The market assumes a unified secured bloc — disclosure could reveal a fragmented group with <40% ownership, enabling faster bilateral settlements and a >10–25% snap-back in senior secured bond prices within 1–3 months. Reaction may be overdone in broad HY ETFs (HYG/JNK) where distressed weight is small; targeted long positions in senior secured tranches could outperform if cooperation proves weak. Unintended consequences: aggressive creditor coordination may invite regulator scrutiny or forced concessions that improve unsecured recoveries, compressing expected returns for secured-focused shorts.

Key Decisions for Investors

• Establish a 2% portfolio hedge by buying 3–6 month HYG 5–10% OTM put spreads (or equivalent JNK protection) sized to pay off if HY spreads widen >150bps; reduce cost by selling nearer-dated lower-strike puts.
• Initiate a 1–1.5% notional directional position buying 6–12 month CDS protection on Altice/related issuers if CDS available, or short 1–2% of outstanding senior unsecured bonds of Altice-like EUR B-rated telcos; target a >300bps widening for realization and trim on 50% P&L at half the max spread move.
• Implement a relative-value pair: long 2–3% LQD (or EUR IG corporate ETF) and short 2–3% HYG (or JNK) for 3–9 months to capture expected IG–HY spread decompression; add to the short leg if HYG underperforms IG by >100bps.
• Within 2 weeks, reduce direct exposure to EUR B-/CCC-rated cable/telco corporate bonds by 30–50%; redeploy proceeds into higher-quality IG corporates or cash (TLT/IEF) until creditor disclosures and rating actions conclude (monitor creditor agreement disclosure and rating agency notices over next 14–30 days).