| The Capital Stack · Issue #004 · March 2026 |
| Liability Management Exercise |
Documentation Is Destiny: The Altice USA LME
A $2 billion term loan issued in December 2022 carried the only meaningful covenant protections in a $25 billion capital structure. Three years later, the company found a way to eliminate it. The allocator's guide to what went wrong and why it can happen again.
Part 1 · The Event
One Day in November
On November 25, 2025, Optimum Communications, the company formerly known as Altice USA, filed a lawsuit in New York federal court calling its own creditors "a classic illegal cartel." The suit accused the lender group that held 99% of the company's $25.3 billion in debt of conspiring to freeze Optimum out of the US credit market.
The lawsuit was the sideshow. On the same day, in a sequence of transactions that closed in hours, the company dismantled the only covenant protection those lenders had against being structurally stripped of their collateral, then moved billions of dollars of assets beyond their reach.
No bankruptcy was filed. No default was triggered. What happened was a liability management exercise, or LME, in which the company used the terms of its own credit agreement to restructure the capital stack unilaterally, without creditor consent. It is the most aggressive such maneuver the US leveraged loan market has seen in years.
Part 2 · The Capital Structure
A Debt Stack Built by Fourteen Different Hands
The vulnerability Altice exploited was baked in years before anyone thought to look for it. To see how, you need to understand how the capital structure was assembled.
Altice USA operates the Optimum brand, one of the largest broadband and cable providers in the United States: roughly 4.4 million customers, 10 million locations passed across 21 states, $8.6 billion in trailing revenue, approximately $3.4 billion in annual EBITDA. The business generates real cash from a subscriber base that, while shrinking on the legacy cable side, is growing in fiber (up 53% year-over-year in mid-2025) and mobile. The business model works. The capital structure does not.
The debt sits at CSC Holdings, LLC, a wholly-owned subsidiary. CSC Holdings has been borrowing under a single master credit agreement since October 2015, originally put in place for the Cablevision acquisition. Over seven years, Altice bolted on new debt tranches through fourteen amendments. Each created a new "class" of term loan, known as a TLB (Term Loan B, the institutional tranche of a leveraged loan, typically held by CLOs and loan funds rather than banks). Each TLB was issued to different lenders, at different times, at different rates, under different covenants. All under the same credit agreement. All governed by different rules.
The Layers
Think of the CSC Holdings credit agreement as a building constructed one floor at a time, each floor designed by a different architect. None had authority to change the blueprints for floors already built. The table below shows the full stack as of Q3 2025, before the November transactions reshuffled it.
| OUTSIDE RESTRICTED GROUP | |||
| Goldman/TPG ABL | $1.0B | Undisclosed | Secured by Bronx/Brooklyn HFC network. Unrestricted subsidiary. |
| Lightpath | ~$1.5B | Various | JV with Morgan Stanley Infra. Non-recourse to CSC Holdings. |
| CSC HOLDINGS — CREDIT AGREEMENT (SENIOR SECURED) | |||
| Revolver | ~$2.1B | Variable / 2027 | JPMorgan admin agent. Original permissive covenants. |
| TLB-5 (and predecessors) | ~$2.9B | L+250* / 2027 | Institutional loan funds. Permissive. No dropdown restrictions. |
| TLB-6 ✖ Eliminated | ~$1.95B | S+450 / 2028 | Only tranche with J.Crew blocker + dropdown restrictions. Dec 2022. |
| CSC HOLDINGS — GUARANTEED NOTES (Ba3, PARI PASSU W/ SECURED PER MOODY'S) | |||
| 11.75% due 2029† | ~$2.05B | 11.75% | Jan 2024. Coupon reflects distressed pricing. |
| 5.50% due 2027 | ~$1.3B | 5.50% | Subsidiary guarantees identical to credit facility. Separate indentures, more permissive on asset transfers. |
| 5.375% due 2028 | ~$1.0B | 5.375% | |
| 6.50% due 2029 | ~$1.0B | 6.50% | |
| 4.625% due 2030 | ~$1.1B | 4.625% | |
| 4.50% due 2031 | ~$1.5B | 4.50% | |
| CSC HOLDINGS — UNGUARANTEED NOTES (B3, CLEARLY SUBORDINATED) | |||
| 5.75% due 2030 | ~$2.25B | 5.75% | No guarantee. ~40¢/$ by mid-2024; likely lower since. |
| Other legacy notes** | ~$3.5B | Various | Cablevision-era. No guarantee. Most permissive covenants. |
| EQUITY: ~$789M market cap. Dual-class; Patrick Drahi retains control. | |||
| CONSOLIDATED NET DEBT | ~$25.3B (7.8x consol. EBITDA, Q3 2025) | ||
*L+250 = LIBOR + 2.5 ppts. S+450 = SOFR + 4.5 ppts. †Issued under separate indenture. **Legacy bucket includes multiple Cablevision-era series. Amounts approximate. Table sums to ~$23B; gap to $25.3B reflects supply chain financing, accrued interest, revolver draws, cash netting.
The Goldman/TPG facility and restricted-group debt sit in parallel structures, not a single waterfall. Goldman/TPG holds first claims on ring-fenced Bronx/Brooklyn assets in an unrestricted subsidiary. Restricted-group creditors hold claims on remaining CSC Holdings assets. The two don't intersect unless entities are substantively consolidated in bankruptcy. Within the restricted group, guaranteed notes rank alongside secured debt (identical subsidiary guarantees); unguaranteed notes rank below both.
Post-November: $3.1B in additional debt was incurred at unrestricted subsidiaries ($2.0B November + $1.1B January 2026, both 9% fixed). Not shown above. Assets dropped to support these facilities drove the leverage divergence below.
An important distinction runs through this analysis. Consolidated leverage (7.8x) measures the entire enterprise including unrestricted subsidiaries. Restricted-group leverage measures only where existing creditors' claims sit. After the dropdowns, the company reported restricted-group leverage of 20.0x at Q4 2025 (includes a non-cash impairment; operating leverage is likely in the low-to-mid teens). Consolidated leverage says the situation is stretched but manageable. Restricted-group leverage indicates that most legacy creditors will be wiped out in a restructuring event.
Where the Fulcrum Falls
In any distressed capital structure, there is a layer where debt transitions from "likely repaid in full" to "likely takes a loss." That layer is the fulcrum security. At Altice, the fulcrum location depends on two variables.
Variable one: restricted-group enterprise value. Consolidated EBITDA of $3.4B at 5-6x produces $17-20B. But restricted-group creditors get paid from restricted-group value only. If operating EBITDA inside the perimeter has been reduced to $750M-$1.1B (implied by low-to-mid teens leverage on ~$15B of restricted-group claims), that's $4-7B of enterprise value against $18.7B of claims ($5B secured + $8B guaranteed + $5.7B unguaranteed).
Variable two: pari passu vs. sequential treatment. Moody's rates guaranteed notes pari passu with secured (both Ba3) because the subsidiary guarantees are identical. Under that reading, combined $13B of secured + guaranteed claims shares $4-7B pro rata at 31-54 cents each; unguaranteed wiped. But restructurings rarely follow rating agency logic. In practice, secured creditors argue their collateral gives incremental priority. Under that sequential reading, secured claims (~$5B) consume most of the $4-7B. Guaranteed notes get zero to 25 cents. Fulcrum within or above the guaranteed notes. Unguaranteed recovers nothing either way. This gap — 31-54 cents versus single digits to 25 cents for guaranteed paper — is the most consequential unknown for anyone evaluating distressed Altice debt.
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Allocator Lesson · Structure When you evaluate leveraged credit, don't ask "does this company have covenant protections?" Ask: "Which specific tranches carry those protections? What happens if that tranche gets refinanced?" Protections that don't apply agreement-wide are a single point of failure. |
Part 3 · Where Structure Was Strong / Weak
How a $2 Billion Loan Became the Only Life Line for Legacy Lenders
The loans issued between 2017 and 2019 were products of a market where insisting on protections meant losing the allocation.
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Context · The Market That Made This Possible 2017–2019: CLO demand was the dominant force in leveraged lending. CLOs were the largest buyers of leveraged loans, and their structural need to deploy capital gave borrowers and arrangers pricing power over terms. Near-zero interest rates pushed institutional money — loan mutual funds, ETFs, insurance companies — into leveraged loans for yield. A long benign credit cycle with low defaults made covenant protections look like unnecessary friction. By the time Altice issued TLB-5 (L+250), cov-lite was already the market standard. Post-COVID: Private credit grew from under $1 trillion to $3.5 trillion in AUM in roughly five years. That flood forced the broadly syndicated loan market to compete on terms even more aggressively: 91% of US leveraged loans ($1.29 trillion) are now covenant-lite. The yield premium for weaker protections vanished entirely. The IMF flagged it plainly: rapid growth has led to weaker underwriting and looser covenants. The US private credit default rate hit 5.7% by early 2025, up from near zero in 2022. (For allocators in core middle-market direct lending: the erosion is most pronounced in upper-middle-market segments where private credit competes directly with the BSL market. Many middle-market lenders still include maintenance covenants.) |
In December 2022, Altice went to market for the TLB-6: $2 billion at SOFR + 450. Nearly double the spread on TLB-5. The lenders had learned from the Serta uptier (2020), the TriMark dropdown litigation (2021), and the J.Crew IP saga. They negotiated a "J.Crew blocker" (preventing transfers of valuable assets into entities beyond creditor reach), restrictions on designating subsidiaries as "unrestricted" (a restricted subsidiary is one creditors have claims on; unrestricted sits outside that perimeter), and limits on "dropdown" transactions (moving assets from inside the perimeter to outside).
These protections would have blocked the November maneuver. The problem: the 13th Amendment provided them for the TLB-6 tranche only. Not for the revolver, TLB-5, or bondholders. The TLB-6 was the only lock on a building with no walls.
By mid-2025, a cooperation agreement (a contract committing lenders to negotiate as a single block) bound 99% of Altice's lenders. Without their consent, no amendment to TLB-6 protections. Without amending, no dropdown. Altice went around them.
The Three Steps
November 25: JPMorgan Chase Funding, a third party outside the cooperation agreement, provided a new $2 billion TLB-7. Proceeds repaid TLB-6 in full. The instant TLB-6 was retired, its protections died. The Fourteenth Amendment reversed the exclusive TLB-6 covenants. What remained was the permissive 2015-era credit agreement.
Same day: two indirect subsidiaries entered a new $2B facility outside the restricted group. Fixed 9%, November 2028 maturity. Assets just dropped from the restricted group. Proceeds retired the TLB-7. Net debt barely changed. Structural geography transformed. The new facility included an anti-cooperation clause barring participants from joining future cooperation agreements. In January 2026, another $1.1B was raised on the same terms. Restricted-group leverage jumped from 7.8x to 20.0x in one quarter (operating figure likely low-to-mid teens after stripping an impairment charge).
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Allocator Lesson · Cooperation Agreements This one organized 99% of creditors and could not stop a third party from bypassing the entire group. The agreement locks existing creditors together. It does not lock the door. |
Part 4 · The New Money
The Precedent: Goldman, TPG, and the Already-Open Door
Cablevision Funding LLC was already an unrestricted subsidiary designated before the TLB-6’s protections existed. In July 2025, it entered a $1 billion asset-backed facility with Goldman Sachs and TPG Angelo Gordon. It had as collateral the Bronx/Brooklyn HFC network assets, with 1.55 million locations passed and 695,000 subscribers. At ~$1,440 per subscriber, the facility runs 30-45% loan-to-value against comparable dense urban cable transactions clearing at $3,000-5,000 per subscriber. No TLB-6 protections were implicated. The entity was already beyond their reach. But the deal proved the concept: ring-fence assets in a structurally isolated vehicle, lend against them at defensible valuations, and establish priority outside the restricted group.
Four months later, Altice applied the same logic at scale, except the November transactions required eliminating TLB-6 first, because the subsidiaries targeted (Cablevision Litchfield and CSC Optimum Holdings) were still inside the restricted group. The Goldman/TPG facility was legitimate infrastructure financing. What followed was a liability management exercise that used the same structural template to fundamentally reshape the creditor hierarchy. Market participants expect these deal-away structures to define 2026 restructurings.
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Allocator Lesson · New Money When new money enters a distressed structure, the question is: where does it sit relative to my position? Capital raised through an unrestricted subsidiary may be structurally senior to your "senior secured" exposure. Seniority is determined by structure, not by label. |
Part 5 · Outcomes by Capital Layer
Who Holds What, and Who Gets Hurt
At the top: the unrestricted subsidiary lenders, earning 9% on ring-fenced collateral whose recovery depends on asset value, not enterprise value. Below them, senior secured creditors (TLB-5, revolver) face a collateral pool that shrank dramatically in one quarter. TLB-5 matures in 2027 with no path to refinancing at sustainable rates. Guaranteed noteholders (~$8B) may recover alongside secured creditors (31-54 cents under pari passu) or behind them (single digits to 25 cents under sequential treatment). Unguaranteed noteholders are wiped under either reading. At the bottom, equity — $789M against $25B of debt — survives only if Drahi avoids Chapter 11.
The Altice France precedent tells you how this has ended before. In March 2024, Drahi ran the same playbook at his French telecom: dropped 80% of EBITDA outside creditor reach, creditors organized, litigation lasted a year, and secured creditors accepted write-offs on over €8B of debt. Drahi kept control. A caveat: France's sauvegarde proceedings are more debtor-friendly than US Chapter 11; US creditors may hold stronger cards. Still, the playbook and the sponsor are the same.
Roughly 14% of LMEs avoid subsequent bankruptcy. For Altice USA to join that group, you'd need to believe revenue stabilizes as fiber grows, the team executes through restructuring noise, and the company refinances at viable terms. What breaks it: broadband losses accelerating, more dropdowns, or a recession compressing cable valuations. At double-digit leverage on the restricted group, there is no margin.
| CS³ COMPOSITE: OPTIMUM COMMUNICATIONS — 14/50 — FRAGILE Scored: March 8, 2026 | ||||||||||||||||||||||||
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CS³ scores capital structures 1-50 to assess whether the structure can survive its stress or is heading toward a credit event. Below 20: the structure itself drives the distress. Altice: 14.
The business is recoverable if the structure is broken and rebuilt. Fulcrum sits between the secured/guaranteed and guaranteed/unguaranteed boundaries depending on pari passu vs. sequential treatment — the most consequential open question in the case. |
The Capital Stack publishes weekly case studies analyzing event-driven situations through the lens of capital structure. Each issue applies CS³ to generate testable predictions with dated catalysts. The framework speaks first; opinion follows.
For informational purposes only; not investment advice. No positions held. Sources: SEC filings (Optimum 8-K Nov 25 2025, 8-K Jan 12 2026, Q4 2025 earnings; CSC Holdings amendments via EDGAR), Q3 2025 earnings, Octus/Reorg covenant analysis, Quinn Emanuel, IMF GFSR April 2024, AIMA/ACC Financing the Economy 2025.
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