The City is abuzz with speculation that debt-laden media tycoon Patrick Drahi has quietly sold a portion of his nearly 25 percent stake in BT over the past few months. According to a new analysis, the French-Israeli billionaire, who is the FTSE 100 company’s largest shareholder with a declared stake of 24.5 percent, may now directly own as little as 10 percent of the company, with the remainder held on his behalf by banks as borrowed shares.
This development comes as Drahi’s Altice group, which holds telecoms assets worldwide, faces increasing pressure from bondholders. Reports suggest that Altice has accumulated debts of $60 billion and is currently in discussions with bondholders regarding debt restructuring plans. In an effort to raise cash, Drahi has been selling off various assets.
The research into BT suggests that Drahi has been selling directly-owned shares in the company to generate funds while instructing bankers to borrow an equivalent number of shares on his behalf to maintain his overall stake in BT. Borrowing shares in this manner is a common practice used as an inexpensive way to obtain an interest in a business.
Analysis by New Street Research, although disputed by Drahi’s allies, indicates that while the tycoon retains control over 24.5 percent of BT’s voting rights, a significant portion of his stake may now consist of borrowed shares held by banks, including Morgan Stanley. This news could be a positive development for BT, as the company’s share price has been under pressure due to concerns that Drahi might suddenly need to sell his stake, potentially flooding the market with shares.
James Ratzer, a partner at New Street, wrote in a research note that has garnered attention within the company, stating that the potential 24.5 percent overhang on BT’s share price due to Drahi’s holding and potential debt issues is likely materially overstated. The research by New Street was prompted by figures showing an unusually high proportion, approximately 17 percent, of BT’s shares are on loan. New Street believes that between 10 percent and 14 percent of this is related to Drahi.
The report speculates that Altice’s shake-up may have been driven by the need to pay down debt taken on to invest in BT. Last month, the Financial Times reported that Altice had taken on loans of £1 billion against its stake in BT. Ratzer estimates that since February, Drahi would have raised £980 million in cash by exchanging direct shares for borrowed shares. BT, Altice, and Morgan Stanley have declined to comment on the matter.
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