Apollo, Oaktree sue Optimum owner over U.S. telco asset restructuring

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Apollo, Oaktree sue Optimum

Highlights

Apollo Global Management and Oaktree Capital sued Patrick Drahi in New York court, alleging he is personally liable for moving Optimum's prime cable assets beyond bondholder reach.
Optimum, burdened with over $20 billion in debt including $6 billion due 2027, transferred its Cablevision business to an unrestricted holdco which then raised $3 billion of senior debt from JPMorgan Chase and $300 million of junior preferred equity.
The legal dispute draws Wall Street attention for its $20 billion size and potential precedents, with JPMorgan playing roles both as a bondholder plaintiff and as a lender through the controversial transaction.

Restructuring dispute heads to New York court

As reported by Financial Times, creditors including Apollo Global Management and Oaktree Capital have sued Patrick Drahi, arguing he is personally liable for a restructuring that moved Optimum Communications’ most valuable cable television assets away from bondholders. The complaint, filed in New York State court late on Monday, describes the move as a “brazen” attempt to place those assets beyond creditors’ claims.

The bondholder group says Optimum, formerly Altice USA, has been insolvent for some time and links that position to Drahi’s long-running operating strategy. Optimum has struggled for years under debt of more than $20 billion, including $6 billion of bonds due in 2027.

Optimum announced in June that it had transferred its Cablevision business, which serves millions of pay-TV customers in the New York City region, into an unrestricted holding company. That entity then raised $3 billion of senior debt from JPMorgan Chase and $300 million of junior preferred equity from investors outside Optimum’s existing creditor group; at the time, the company said the transaction could help trigger settlement talks with creditors facing steep losses on their debt holdings.

Wall Street watches precedent for distressed debt battles

The case is drawing close attention on Wall Street because of both its size and the potential precedent it could set for future fights over distressed debt restructurings. Creditors have argued in court filings that this kind of creditor-on-creditor conflict damages U.S. capital markets and should be discouraged, even though firms such as Apollo and Oaktree have previously used similar restructuring tactics as asset owners.

Altice has separately sued the bondholder group, alleging the creditors formed an illegal cartel by agreeing to negotiate with Optimum only as a unified bloc. The bondholders deny those claims and are seeking to have that lawsuit dismissed.

The dispute also highlights tensions inside large banking groups. JPMorgan’s asset management arm is a bondholder and a plaintiff in Monday’s lawsuit, while JPMorgan’s commercial bank has lent to Optimum through the challenged unrestricted holdco transaction.

Optimum says the bondholders’ allegations are without merit and says its actions to protect and maximize stakeholder value comply fully with its debt agreements and applicable law. JPMorgan and Drahi do not immediately respond to requests for comment.

Our earlier article on Moody’s downgrades of major U.S. banks explained that the rating cuts reflected mounting sector stress tied to deteriorating asset quality and weaker profitability. We noted that higher interest rates and geopolitical tensions were tightening funding conditions and raising broader market-stability concerns, with banks urged to bolster capital buffers against persistent credit risks.

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