Drahi Retakes Control of Altice as CEO Quits Amid Debt Woes

(Bloomberg) -- Billionaire Patrick Drahi reasserted himself at the helm of Altice NV, taking direct control of the phone and cable company he founded after a harrowing week that saw one-third of the company’s market value vanish.

Chief Executive Officer Michel Combes resigned after a little more than a year in the job, the company said in a statement late Thursday. Dexter Goei will return as CEO, while remaining in charge of the company’s U.S. unit. Chief Financial Officer Dennis Okhuijsen will lead the European operations. They will report directly to Drahi, who becomes president of the board.

Drahi faces an uphill battle to reassure investors who were floored by a Nov. 2 profit warning that raised questions about whether Altice can manage a debt load that tops $55 billion. While Altice has spent billions expanding in the U.S. and Europe and is focused on a turnaround of its French business, the benefits of cost-cutting at its SFR Group SA have been delayed as competition weighs on prices and subscriber retention.

“This might sound like Altice is taking action but it changes nothing -- the main problem at Altice is not one of management, but of an unsustainable capital structure,” Saeed Baradar, senior managing director at Louis Capital Markets, said in an email. A restructuring is needed to take back control of the balance sheet, which would dilute current shareholders, he said. “That is why the stock keeps going down!”

Altice declined 0.2 percent to 10.64 euros at 2:08 p.m. in Amsterdam, after earlier falling as much as 5 percent. A week ago, the shares traded above 16 euros.

Reinstalling the leadership team that built the company represents “a desire to react in a symbolic way by returning to what has worked and made Altice successful," Andrea Tueni, a sales trader at Saxo Banque France, said in an emailed comment. "Drahi, coming back to the fore, is looking to reestablish a climate of trust."

Altice has 49.6 billion euros ($57.8 billion) of net debt, the company said in an analyst presentation alongside earnings last week. The cost of insuring Altice’s debt rose to the highest level since February, with credit-default swaps climbing 14 basis points on Friday to 332 basis points, according to data compiled by Bloomberg.

While Altice’s bond prices have fallen, many of them still trade above par, meaning that while risk is increasing, traders don’t perceive a significant threat of default. Altice’s 750 million euros of bonds due in February 2025 dropped about 4 cents on the euro to 100 cents on Friday, the biggest decline since being issued in 2015 and the lowest since December, according to data compiled by Bloomberg.

As part of the management changes, Alain Weill will become CEO of the French unit, while Armando Pereira will be Altice Telecom chief operating officer, responsible for core telecommunications operations across the company. Combes, 55, resigned from the board.

“This structure represents a return to the core organization that created the success of the Altice Group,” the company said.

Publicly traded Altice USA Inc., led by 46-year-old Goei, declined 4.4 percent to $21.80 on Thursday in New York. The company, whose assets include the former Cablevision Systems and Suddenlink Communications, went public in June at $30 a share.

--With assistance from Gerry Smith Crayton Harrison Abigail Moses and Neil Denslow

To contact the reporter on this story: Alexandre Boksenbaum-Granier in Paris at aboksenbaumg@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Kim Robert McLaughlin, Rebecca Penty

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