French-Israeli billionaire Patrick Drahi said he felt “betrayed and deceived by a small group of individuals, including one of our oldest colleagues,” being investigated as part of a corruption probe involving his telecommunications empire, Altice.
If the allegations are true, the individuals had “carefully hidden their actions from me, their colleagues and the total group,” Drahi said during a quarterly results call for debt investors of Altice International on Monday, the first time he has publicly addressed the corruption probe since Portuguese prosecutors announced a criminal investigation last month.
“I do believe that our governance was good and that we can trust all of our management teams,” he said, adding that Altice is evaluating and enhancing third-party due diligence processes and procedures. Drahi said he didn’t expect the probe to affect previously-published financial results, nor Altice International’s cash position or guidance for 2023 and beyond.
The billionaire is scheduled to join a call for debt investors in Altice France on Tuesday.
Armando Pereira, an Altice co-founder and Drahi’s right-hand man, is among more than a dozen employees and 60 suppliers in Portugal, France and the US to be suspended in relation to allegations of corruption, money laundering and tax fraud, and some of Altice’s bonds have been pushed deep into distress. The spreading crisis comes as the group’s debt pile has ballooned to more than $60 billion after years of aggressive acquisitions.
Portuguese prosecutors have said they suspect that procurement decisions taken at Altice Portugal were rigged in a way that harmed the group’s own companies and competitors and benefited intermediaries. A three-year investigation led to 90 searches of homes and offices and several arrests. Pereira remains under house arrest in Portugal. He has denied the Portuguese prosecutor’s allegations via his lawyer.
Read more: The Corruption Probe Rocking Altice Tycoon’s Empire: QuickTake
Drahi downplayed Pereira’s role at the company, and echoed previous comments that he owned no direct shares in Altice nor the Next Alt holding company. The billionaire said Pereira had made a small investment of less than 1% of the equity in Altice’s first acquisition.
“Over time, the form of his economic interest evolved, and since 2005 he did not own a single share or right in any of the Altice entities but simply maintained a carried interest of around 20% of my personal economic interest,” Drahi said.
When later asked about the 20% carried interest, Drahi said it was a “personal issue” that had “no impact on Altice International.”
Altice International’s management said on the call Monday that the company would come to market in the second half of the year to address its 2025 maturities and “potentially” the debt coming due in 2026. It will supplement that strategy with asset sales.
Altice International bonds extended gains after the call, with second-lien bonds issued by Altice Finco SA maturing in 2028 indicated 4.6 cents on the euro higher at 64.1 cents, according to data compiled by Bloomberg.
Altice Group CFO Malo Corbin said the sale of a Portuguese data center, which started before the corruption probe launched, “remains ongoing,” and that it’s confident it will deliver on the sale in the “coming weeks.” It will use the proceeds of the sale to reduce debt, he added.
In the earnings statement for Altice International released before the call, the company reiterated previous statements that the Portuguese unit was a victim of the alleged wrongdoings and that it had opened its own internal audits in every region in which it operates. It also said it was conducting a “full review and thorough reinforcement of the approval process on all procurement, payments, purchase orders and related processes.”
Altice International’s second-quarter earnings rose 7.2% year-on-year on a constant-currency basis, with operating free cash flow amounting to €241 million ($265 million). For the full year, the company expects earnings and cash flow to grow “broadly in line” with year-to-date performance.
Drahi and his management team plan to host investor meetings in London and New York in September, the company said.
--With assistance from Giulia Morpurgo and Henrique Almeida.
(Updated with context about Drahi’s business ties to Pereira from seventh paragraph)
