Altice Favors Euros in $6 Billion Debt for Oi’s Portugal Assets

Billionaire Patrick Drahi’s Altice SA increased the euro portion of a more than $6 billion junk debt offering to fund the acquisition of Oi SA’s Portuguese telecommunications assets.

Altice boosted the size of its 10-year notes in the common currency to 750 million euros ($848 million) from 500 million euros while cutting the dollar portion to $1.48 billion from $1.78 billion, according to a person familiar with the deal who asked not to be identified because they’re not authorized to speak publicly.

The Luxembourg-based cable company is raising funds on both sides of the Atlantic as average borrowing costs diverge on central bank policies. U.S. investors demand 2.5 percentage points more on average to hold junk bonds than European investors, near the biggest gap on record, according to Bank of America Merrill Lynch index data going back to 2005.

“The offering says a lot about the difference between the U.S. and euro markets,” said Mark Chapman, a senior analyst at CreditSights Inc. in London. “The choice to resize the deal reflects the relative pricing opportunities and the currency swap.”

European Central Bank President Mario Draghi’s commitment to an historic 1.1 trillion-euro asset purchase program has cut average borrowing costs for the region’s high-yield companies to 4.03 percent, according to Bank of America Merrill Lynch index data. The average yield on similar U.S. bonds is 6.54 percent, the data show.

Altice agreed to buy Rio de Janeiro-based Oi’s Portuguese assets for 7.4 billion euros, expanding the billionaire’s telecommunications empire in Europe.

Altice is rated four steps below investment grade at B1 by Moody’s Investors Service. The ratings firm placed Altice on review for downgrade on Dec. 10, citing the impact of the acquisition on the company’s debt to earnings ratio and potential difficulty in integrating the new assets.

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