Creditors of Optimum Communications Inc., formerly Altice USA, are suing the telecommunications company and its controlling shareholder Patrick Drahi, accusing them of engaging in "fraudulent" deal-making. The lawsuit, filed in New York, alleges that Optimum undertook a series of transactions that improperly moved assets away from the creditors' reach and into the pockets of insiders, particularly benefiting Drahi and other majority shareholders. The creditors claim these collateral transfers lacked legitimate business reasons.
This lawsuit is the latest development in a contentious feud between Optimum and its lenders. Optimum, led by billionaire Patrick Drahi, had previously sued Apollo Capital Management, Ares Management, BlackRock Financial Management, and other financial firms on antitrust grounds. Optimum alleged that these firms colluded to form an "illegal cartel" that blocked it from refinancing billions of dollars in debt and effectively locked it out of the U.S. leveraged-finance market. The lenders, in turn, have asked a federal judge to dismiss Optimum's antitrust lawsuit, arguing that U.S. antitrust law does not apply to creditors working together during renegotiations, a stance supported by Wall Street trade groups.
Adding to the complexity, Optimum recently announced a deal to move more assets, further complicating the situation for the "co-operation group" of lenders. This move put the lenders in a difficult position: either risk a bankruptcy filing with potentially lower recovery or agree to terms they had sought to avoid. The current lawsuit by the creditors, demanding the unwinding of these transfers, underscores the escalating nature of this financial dispute between Optimum Communications and its major lenders.
