Research Update: Altice France S.A. Downgraded To 'CCC+' On Weaker Cash Flow Prospects And Sustainability Concerns; Outlook Developing

French telecom company Altice France S.A.'s management has guided for weaker-than-expected earnings and cash flow prospects for 2024, resulting in still high S&P Global Ratings-adjusted debt to EBITDA of about 7.0x, a tightening EBITDA cash interest coverage of 2.0x-2.2x, and a large deficit in reported free operating cash flow (FOCF) after leases. Management set a more ambitious financial policy target of net leverage below 4.0x but added conditionality to its commitment to use asset sale proceeds for deleveraging. In our view, this increased sustainability risks. We believe this new tone and policy increased the likelihood of tender offers, the risk of a distressed exchange on Altice France's secured debt and Altice France Holding S.A.'s unsecured debt, and--in the absence of

...- French telecom company Altice France S.A.'s management has guided for weaker-than-expected earnings and cash flow prospects for 2024, resulting in still high S&P Global Ratings-adjusted debt to EBITDA of about 7.0x, a tightening EBITDA cash interest coverage of 2.0x-2.2x, and a large deficit in reported free operating cash flow (FOCF) after leases. Management set a more ambitious financial policy target of net leverage below 4.0x but added conditionality to its commitment to use asset sale proceeds for deleveraging. In our view, this increased sustainability risks. - We believe this new tone and policy increased the likelihood of tender offers, the risk of a distressed exchange on Altice France's secured debt and Altice France Holding S.A.'s unsecured debt, and--in the absence of a discounted exchange--the risk that Altice France will not deleverage sufficiently to a sustainable leverage profile. - We therefore lowered our issuer and issue credit ratings on Altice France and its secured...

Research Update