Altice : Altice International, the diversified arm of Altice

>Altice International issued last week EUR 675m of new unsecured notes 4.75% 2028 to strengthen its liquidity - The proceeds from the bond issue and the placement of EUR 1.09bn equiv. of new term loans due 2026 (EUR 300m and USD 900m at E/L+275 bp, OID 99.75%) will be used to repay EUR 675m of drawings under the revolvers as well as the outstanding secured notes 6.5% 2022. The refi is leverage neutral (3.7x, pro-forma the acquisition of Media Capital) and will have a positive impact on liquidity, the debt maturity profile (7.4 years vs. 6.6 years initially) and the average cost of debt (5.5% vs. 5.8% initially) of Altice International (AlticeInt).We maintain our Stable credit opinion - We like AlticeInt’ business diversification. The company relies on 3 main markets (Portugal, Israel and the Dominican Republic) and the multi-activity Others segment (technical & customer services, FOT), contrary to many credit groups in the cable sector (apart from UPC). In Portugal, AlticeInt should benefit from the fast expansion of the FTTH network and content investments at the top line level, while EBITDA should grow again in this market in 2018. The risk of content cost inflation is lower than in France since local football rights are shared by the operators. In Israel, results are boosted by solid customer gains in the mobile segment, together with limited churn in the fixed segment. While no major acquisitions are expected in Europe at this juncture, Altice could seek to push down AlticeLux’ bonds at the level of opcos from mid-2018. Hence we think that AlticeInt’s net leverage should hover around 4.0x, or 4.5x on an adjusted basis. Buy reco on the new 2028 notes, other recommendations maintained (except for SFR’s 2024 secured notes, Reduce vs. Neutral) - The new unsecured notes due 2028 were priced at par to yield 4.75% and now trades at 100.5% (Ytw of 4.7%, z+408 bp). The spread remains attractive compared to other EUR bonds in the cable universe and offers a premium of >70bps over Altice Lux’ unsecured notes 2025 (Ytw of 3.0%, z+315 bp) and UPC’s unsecured notes 2029 (B2/B, Ytw of 4.3%, z+333 bp).Our existing recommendations on Altice bonds are unchanged, except for SFR’s secured notes due 2024 (Reduce vs. Neutral). Their yield (1.8%) offers no premium against Unitymedia’s secured notes due 2025 (the best-in-class operator in the sector) and falls short of Digi’s secured notes due 2023 (2.4%).