December 4, 2013 / 10:30 AM / 4 years ago

Altice "seriously considering" IPO next year - sources

LONDON, Dec 4 (IFR) - Luxembourg-based cable and telecommunications company Altice is contemplating going public next year, according to market sources, as it looks for new sources of financing to fuel its global expansion.

Altice is marketing a jumbo USD1.685bn-equivalent high yield bond package to back recent acquisitions in the Dominican Republic, and has been indicating to bond investors that it is looking at a potential listing next year.

“They were asked about an IPO on the bondholder call. They said they were seriously looking at one and that it would come in 2014 if they go ahead,” said a high yield investor.

A banker close to Altice said that the company has been gearing up for a potential IPO for the past six months, reorganising its corporate structure to facilitate a listing.

The Altice VII restricted group is the entity that has raised debt financing over the past year and contains its cable businesses in Israel, Portugal, and the French Overseas Territories among others.

Altice’s founder and main shareholder Patrick Drahi also controls 30% of the voting shares of French cable firm Numericable, and has entered into agreements to up this stake to 40%, subject to regulatory approval.

A new holding company called Next LP has been created to control both Altice VII and the Numericable stake, and this is the entity that would go public if Altice is listed, according to the banker.

“They’ve been relatively open that they want to go sooner rather than later,” said the banker.

“With Ebitda of nearly EUR900m, they could be a very big public company.”

The investor added that Altice is eyeing the equity market as it is reaching the limits of how far it can grow through debt financing alone.

“The IPO story is not a deleveraging story; it’s more of a recognition that they have more to do in the M&A space and they’re running out of fuel in the debt markets.”

Altice’s existing covenants restrict senior leverage to 3x Ebitda and total leverage to 4x. Altice has capacity under debt incurrence baskets to go slightly beyond this, and its new deal will take leverage slightly beyond this to total net debt of 4.1x and senior debt of 3.1x.

The banker said that while Altice management has said it is looking for sources of financing other than debt, he thinks it still has capacity left in the debt markets.

“Another thing you have to consider is an IPO’s standstill period, which would make it hard for them to make strategic acquisitions for six to nine months,” said the banker.

“For future acquisitions though, it’s always good to have a public valuation behind you. Firstly, it cheapens the cost of debt, and secondly it’s easier to incentivise the management teams at the target companies if you can offer share schemes.”

Altice enters the second day of its US bond roadshow on Wednesday, with an investor meeting in Boston. The aim is to price the bonds by the close of business on Thursday, the banker said. (Reporting by Robert Smith, editing by Alex Chambers, Julian Baker)

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