“Debt is a zero subject. » On October 17, in front of staff representatives of Altice France (SFR, BFM-TV), to whom he spoke for the first time since the arrest, on July 13, of his historical associate, Armando Pereira, for alleged acts of corruption, Patrick Drahi plays down the drama: it is not the approximately 24 billion euros of debt carried by his company which will haunt his nights.
Aged 60, the businessman has learned to juggle bank loans since he launched into business in the mid-1990s. He has seen the vertigo of the fall up close, as in 2007, when his company at the time, Numericable, was crumbling under 3 billion euros of debt for only 1 billion in turnover. But Mr. Drahi never fell, each time finding the financial acrobatics that allowed him to regain his balance.
Until a few months ago, Mr. Drahi’s calm could be heard. After the financial crisis of 2008, in order to revive the economy, the major central banks continually lowered interest rates, to the point, particularly in the euro zone, of making them negative. And as this was not enough, they even went so far as to buy the debt issued by States or companies to relieve them. As if, when purchasing their apartment, a household saw the European Central Bank buy back part of their credit.
No short-term reimbursement
Mr. Drahi took advantage of this comfort to do his business, according to the classic model of leveraged buyout (leveraged buy-out, LBO) developed by investment funds: buy a company with maximum credit and use its profits to pay interest on the debt. It is thanks to this cheap money that the businessman managed to buy SFR from Vivendi in 2014 for 13.5 billion euros, 100% on credit.
A coup that the operator is paying for today. The environment has changed. With the return of inflation, central banks raised their rates to slow economic activity and reduce overheating prices. As a result, money becomes more and more expensive. Mr. Drahi noticed this recently. Altice International, the strongest subsidiary of its empire, borrowed 800 million euros on the financial markets at the beginning of October, at a rate of 10.5%, in order to replace a soon-to-expire line of credit from a loan contracted in July 2020 and whose rate was only 2.25%. Altice is therefore paying four times more for its money than three years ago.
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