Altice International downgraded to 'CCC+' by S&P Global on weaker prospects
Investing.com -- S&P Global Ratings has downgraded the long-term issuer credit rating of telecommunications operator Altice International S.à.r.l. from 'B-' to 'CCC+' due to weaker-than-expected results for 2024 and sustainability concerns. The downgrade also extends to the issue rating on Altice Financing S.A.’s senior secured debt and Altice Finco S.A.’s senior unsecured debt, which were lowered to 'CCC+' and 'CCC-' respectively.
The revised rating reflects a forecast of reduced revenue and EBITDA contribution from Altice Labs, subscriber losses in Israel and the Dominican Republic, and the full-year deconsolidation of Teads and Geodesia. These factors are expected to constrain the company’s performance in 2025.
The risk of a distressed exchange has increased due to ongoing earnings decline, persistently elevated leverage beyond the company’s target of 4.0x-4.5x, negative free operating cash flow (FOCF) after leases, depressed debt trading levels, and the looming 2027 debt maturity wall.
Altice International’s capital structure is deemed unsustainable in the long term, with the company dependent on favorable business, financial, and economic conditions to meet its larger financial obligations as they come due. It is unclear how the company will repay at par its larger debt maturities starting in 2027.
S&P Global Ratings noted concerns about governance and the prioritization of the shareholder. The ratings agency is cautious about the use of available cash on the balance sheet, given Altice International's history of prioritizing shareholders over lenders. This was evidenced by a large dividend paid in 2023 and a large cash upstream to a parent company in 2024.
Altice International lowered its 2024 EBITDA and operating free cash flow expectations due to subdued trading, lower equipment sales from Altice Labs, the sale of Teads, and the carve-out of Geodesia. S&P Global Ratings now forecasts revenue of €4.2 billion and EBITDA of €1.4 billion for 2024, with a 2% adjusted revenue decline and largely stable EBITDA in 2025.
The negative outlook on Altice International reflects earnings decline in 2024, blurred prospects for 2025, a large debt burden which places the company outside its leverage target, and the expectation of continued negative FOCF after leases in 2025. This increases the risk of a debt restructuring.
S&P Global Ratings could further lower the rating if Altice International announces a sub-par debt exchange offer over the next year, if its liquidity weakens, or if the risk of a distressed restructuring to address the company's large debt burden increases. A revision to a stable outlook would require an increase in EBITDA way beyond current expectations, a rebound in FOCF after leases toward breakeven level, and improved access to capital.
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