Medium term
/
Buy
Trade view / 20 November 2017 at 11:16 GMT

Altice bonds offer attractive yields — #SaxoStrats

Fixed income Specialist / Saxo Bank
Denmark
Price target: .
Market price: .
strats
 Background


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.

Altice 5y Stock Price

Source: Bloomberg

Management and risk description

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%.


Parameters

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.


Key risks

Reorganisation of the company’s management may provoke disruption to operations.  Delay in deleveraging the balance sheet.

Altice 7.25% 2022 bond price since issuance
Source: Bloomberg

Outstanding issues:
chart
 Source: Saxo Bank and Bloomberg

Time horizon: Medium/Long term

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
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