Altice bonds offer attractive yields — #SaxoStrats
Altice is a Netherlands-based multinational telecoms company. The company suffered from weak Q3 results as revenues in the US were hit by a strong euro and increased competition in the European market, especially in France. Even though the company didn’t miss expectations hugely and did make modest cuts to its 2017 guidance, the stock fell sharply and the bonds followed suit, mainly due to an increase in the net debt to Ebitda ratio (now above 5x).
The senior management re-organisation that sees the founder Patrick Drahi stepping down as president of the board may be a positive sign that management wants to be proactive in addressing the capital structure.
We believe that Altice 7.25% May 2022 unsecured notes (B3/B) offer an attractive yield of approx. 6% (YTW). The longer 6.25% unsecured notes due February 2025 offer also a yield of approx. 6% and they are less likely to be called amid changes of capital structure. Altice’s bonds offer almost double the yield of their competitors Wind-Tre 3.125% January 2025 (B1/BB-) with an indicative yield of 3.35% and the new Matterhorn 4% November 2027 with an indicative yield of 4%. The company also offers bonds in USD and Altice 7.625% February 2025 offers a yield of 7.6%.
Minimum piece is 200,000 nominal USD with 1,000 nominal USD increments. Return objective is primarily repayment and price appreciation in the mid-term as business strengthens and the balance sheet is deleveraged.
Reorganisation of the company’s management may provoke disruption to operations. Delay in deleveraging the balance sheet.