The Bottom Line™:

• Last Friday, Altice International announced it had designated Altice Portugal and Altice Caribbean as Unrestricted Subsidiaries, moving significant value out of the restricted group for its high yield bonds.
• The aggressive maneuver took advantage of the staggering amount of investment capacity under Altice International’s bonds, including a Restricted Payments build-up basket that has been accruing capacity for over a decade and importantly—has no ratio test for investments.
• Additionally, we review the key sources of investment capacity and explain the implications of the Unrestricted Subsidiary designations.

Overview

This year’s Black Friday turned into “Bleak Friday” for Altice International S.à r.l. (“Altice International” or the “Company”) investors when the Patrick Drahi-owned telecommunications giant announced that it had designated Altice Portugal S.A. (“Altice Portugal”) and Altice Caribbean S.à r.l. (“Altice Caribbean”) as Unrestricted Subsidiaries under each of Altice International’s debt documents.The Company also announced that a subsidiary of Altice Portugal had raised €750 million of structurally senior debt and that a further €2 billion of incremental debt capacity at Altice Portugal had been reserved.