Lenders to struggling private equity-owned companies have had a rough time of late, regularly getting whacked with heavy losses after fierce refinancing battles. But their compadres who binged in recent years on junk credit from Europe’s tycoon business builders won’t have much sympathy.
While buyout firms have had to keep at least one eye on future relations with the creditor community, individuals who’ve built their trouble-hit empires from scratch have been tougher adversaries, according to several market participants. In the words of one key lender to telecoms billionaire Patrick Drahi, who asked to stay anonymous discussing a sensitive matter, these owners are ready to burn a business to the ground rather than give it up.
Recent maneuvers by Drahi, Irish packaging magnate Paul Coulson and others to keep control of their companies — or at least their crown-jewel assets — after strenuous debt-restructuring talks show such perceptions can give owners an edge. As Donald Trump’s tariffs raise the risk of economic carnage globally, debt investors will brace for more bruising standoffs with European founders.
Drahi’s Altice France SA is the standout example of a non-investment grade business that borrowed massively in the cheap-money era, and then crashed to earth as interest rates stayed higher. It pushed creditors to the point of vowing they’d never back another billionaire after a series of aggressive moves such as shifting money from disposals beyond debtholders’ reach.
And yet Drahi has inked a deal with holders of Altice France’s €24 billion ($27.2 billion) of debt that will see him keep a 55% controlling stake without putting in a penny of his own. In return for a 45% share and some cash, creditors will write off €8.6 billion of borrowing. Getting a large chunk of equity is a victory of sorts, but unsecured lenders had to take an 80% loss as part of the deal.
The tycoon didn’t even need to follow through on some of his threats, which proved effective in bringing angry debtholders to the table.
He’s not the only one who’ll emerge bloodied but unbowed. Coulson is still locked in creditor talks, where he’s aiming to keep hold of his stake in Ardagh Metal Packaging, his prize asset, again without stumping up any fresh equity. The af Jochnicks, a wealthy Swedish family, are injecting €25 million of their own cash into cosmetics group Oriflame Holding AG after siphoning away assets, and they’re being rewarded by keeping full ownership even as bondholders are having to write off two thirds of their exposure.
So-called liability-management exercises have boomed in the US over the past year, as private equity owners exploit lax legal wording on debt terms to force through company refinancing deals that keeps them afloat at the expense of existing lenders. European buyout firms have been more leery of alienating creditors, but the continent is unusual in that many of its junk-rated companies are founder-owned. And they’ve happily seized on the American playbook.
“The European LMEs we’ve seen have been family or personally owned businesses with less of a brand to protect,” says Adam Gallagher, partner and head of law firm Simpson Thacher & Bartlett’s restructuring team in London, referring to their credibility in the junk-debt market.
A spokesperson for Ardagh declined to comment. Spokespeople for Altice and Oriflame didn’t respond to requests for comment.
Ditching the classics
In a classic debt workout, creditors take over if shareholders don’t contribute. But the rise of the LME in the US, and its mimicking by some of Europe’s largest junk-rated companies, means the rules are being ripped up.
As part of the restructuring deals Drahi and Coulson have been negotiating, the only new money they’ve offered comes from reinserting assets they’d siphoned away from creditors’ reach.
Drahi will contribute some of the €1.55 billion he got from the sale of a subsidiary, Altice Media, and other units. These had been part of a so-called drop-down transaction — a tactic made famous during preppy clothes retailer J Crew’s debt deals almost a decade ago — where Altice said the assets weren’t bound by its debt covenants and could be used as collateral for new borrowing.
Such moves, or even the threat of them, were a powerful negotiating tool. Altice had several such weapons, and time in its favor with no big imminent maturities, and creditors knew it. A consensual deal was struck, where Drahi emerged with billions of newly created equity value. A key sop to debtholders was a block on his ability to repeat the trick.
“It’s often not new equity that the shareholders put on the table now, as what they’re conceding instead is document flexibility,” says Jordan Sauer, managing director at Beach Point Capital Management. “That’s become the trade: you give to creditors tighter documentation, which sometimes also entails putting the assets you’d shifted away back into the credit.”
In Ardagh’s case, it went for a full drop-down last year. It raised more than $1 billion of fresh debt from Apollo Global Management Inc., using as collateral assets including its stake in Ardagh Metal Packaging.
Now, as part of a separate fuller restructuring, Ardagh is looking to raise cash to repay Apollo and move its metal-packaging stake into a new entity controlled by Coulson. Unsecured creditors would get the less-loved glass business in exchange for writing off debts, plus some minority equity in the metals arm. Talks are ongoing with most of its secured and unsecured creditors and, while the terms could still change, negotiations have advanced toward a deal along those lines.
As with Drahi, Coulson wouldn’t be putting in new money.
“Without contributing any new value beyond the value of the metals business that Ardagh already owned, insiders will obtain 80% of Ardagh’s most valuable asset, all to the detriment of Ardagh and its creditors,” hedge funds Arini and Canyon, which have among the biggest exposures to its unsecured bonds, said in a lawsuit filed in New York against the company and Coulson.
The transaction, they added, “will allow Coulson and entities he owns or controls, as the Company’s otherwise out-of-the-money controlling shareholders, to obtain the most valuable assets in the Ardagh Group.” And all of this, “in exchange for nothing.”
Ardagh responded in a statement that it “strongly believes that the complaint is without merit and intends to vigorously defend against the proceedings.”
Eternal Oriflame
Elsewhere in Europe, Oriflame and the af Jochnick family’s deal followed a similar path. First they exploited loose legal wording to move four subsidiaries out of bondholders’ reach and used that as leverage to squeeze generous terms. Creditors were quick to push back and negotiations soon kicked off, according to people familiar with the matter.
The eventual transaction let the shareholders keep all of the company, while bringing back the assets they’d siphoned away. Bondholders led by Blantyre Capital and Tresidor Investment Management will write off most of their debt. Unlike Drahi and Coulson, the af Jochnicks are adding €25 million of their own money, while creditors are stumping up €25 million of fresh debt.
“The shareholders have used the threat of the drop-down and the new money as the carrot and stick to get the proposal across,” wrote Helen Rodriguez, head of European special situations at CreditSights Ltd., in a client note.
Another difference between these individual-led refinancings and the more typical LME is that creditors within the same class have largely been treated equally. In the divide-and-conquer world of US refinancing, big lenders often enter exclusive talks with an owner to the detriment of those left out.
For some, the sheer unpredictability of individual owners, and their willingness to brandish standard LME techniques just as a way to bring creditors in line, makes the outcome harder to guess in Europe.
“What we’ve seen so far is that the weakness in the documentation — which is just as bad here as in the US, if not worse sometimes — is being used as a very strong negotiating position,” Rudi Singh, founder of Aptior Capital, a distressed debt specialist, said on Bloomberg’s Credit Edge podcast recently. “But it’s much harder to know when you have a checkmate.”
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Published on April 14, 2025
