-- It was only late last summer when telecoms billionaire Patrick Drahi was relying on the personal touch to soothe the frazzled nerves of his investors. As debt prices in his company Altice France came under pressure, he and his lieutenants were reassuring creditors that they’d be looked after.
Others are waiting to see what happens next before passing final judgment, arguing that such standoffs are inevitable in the high-risk, high-reward world of junk debt. Creditors can have short memories when it comes to flocking back to people who’ve lost them cash in the past. Some creditors are doubly furious that tycoons are threatening to make debtholders take the pain of their borrowing binges after paying themselves handsomely via dividends over the years, and funding opulent lifestyles. Art lover Drahi owns work by Picasso and other masters, and bought the auction house Sotheby’s for $3.7 billion in 2019 as a prize asset.
But in recent years tycoon owners have been prominent in Europe’s high-yield debt markets, often with bad outcomes. Jean-Charles Naouri built a retail powerhouse in France with a lot of leverage, before losing it in a restructuring last year. Others stumbled under too much debt: Ilija Batljan, founder of ailing Swedish property giant SBB, was ousted as boss of his own creation.
Drahi racked up $60 billion of debt by acquiring one of France’s biggest phone companies and then expanding in Portugal, Israel and the US. The Issa brothers borrowed billions as they went from owning a gas station in Blackburn to buying forecourts across the globe and Britain’s third-largest grocer. Coulson made Ardagh a packaging leader with the aid of more than €10 billion of debt.
Drahi and Coulson certainly haven’t held back in some recent moves. Ardagh has inked an agreement with investment titan Apollo Global Management Inc. to refinance its short-term borrowing and effectively reduce the amount junior creditors holding $2 billion of debt will get back. Even hedge fund heavyweights such as Millennium Management have been caught up in the turmoil, having to liquidate Altice wagers, while star credit trader Hamza Lemssouguer’s Arini lost money in March after similar bets.As well as being swept up by the tide of cheap money and the hunt for yield, many investors were charmed by the men at the helm of these companies. A few have delivered.
“There’s been a lot of noise for large capital structures in this space,” says Raphael Thuin, head of capital markets strategies at Tikehau Capital. “And it leaves you with the feeling that when things get dicey, bondholders often get the short straw.”Trump expected to turn his full focus on Harris at first rally since Biden's exit from 2024 race
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