BT: FTSE 100 giant’s majority shareholder Altice may be forced to sell stake as debt concerns grow
Indebted French telecoms group Altice took out a £1.5bn margin loan against its stake in FTSE 100 giant BT Group, as part of its debt-funded global growth plan it has emerged.
Patrick Drahi, the majority owner of Altice, has overseen the company’s explosive growth, but its debts are now becoming a problem and questions are starting to emerge about whether or not the business can maintain its footprint.
Altice upped its stake in BT to 24.5 per cent last year, though it said at the time that it didn’t intend to make a takeover bid.
Now, it has been revealed that Drahi built the position by borrowing heavily with substantial loans and derivatives financing.
The company initially built an 18 per cent stake in BT in 2021 using so-called funded equity collars. These combine bank loans and derivatives to help investors buy positions using borrowing money while hedging downside exposure.
Altice signed a new margin loan facility in 2022 to borrow up to £1.5bn against BT shares, using the majority of this money to pay back the loans from the previous year, an investigation from the FT revealed.
This year, Altice has experienced a raft of credit rating downgrades from the likes of Moody’s and S&P, with its debt falling to a CCC+ rating.
“We believe weak credit metrics, relatively muted prospects, and management’s reduced commitment to further deleverage unless lenders participate increase sustainability risks,” S&P analysts said.
Loan documents seen by the FT revealed that Altice’s margin loan on BT had a three-year maturity and began at a loan-to-value ratio of 60 per cent, meaning it had to pledge £100 of stock for every £60 borrowed.
BT’s shares have dropped by almost a quarter since the deal.