Blog Post
Relationship risk is keeping European LMEs in check
The twin shocks of Altice and Ardagh last year put the European market on alert for a wave of aggressive liability management exercises (LMEs) borrowing the dropdown and uptiering tactics long normalised in the U.S. That wave hasn’t arrived.
The fear traces to Altice founder and ultimate shareholder Patrick Drahi. He keeps stripping assets within the Altice complex and shifting them into unrestricted subsidiaries, but his tactics have not spread the way European investors feared.
Private equity firms hear regular pitches for aggressive LME solutions on over-levered European portfolios and consistently pass, unwilling to damage relationships with the par investors they need to fund future deals.
Cinven and Bain Capital-owned Arxada is a case in point. The sponsors will inject new money alongside unsecured bondholders into the Swiss specialty chemicals business to secure a maturity extension. Partners Group is taking the same path with Emeria, its French property management business.
The pattern points to a clear risk factor. Aggressive European LMEs sit with individually owned businesses like Altice and Ardagh, which makes investors in Ineos and the ION platform nervous. Push hard enough and European sponsors could take off the gloves too.
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