Altice ‘Jenga Tower’ Menaces Global Credit Markets (Podcast)Altice distress is ripping through global credit markets and setting some ugly precedents for debt investors. Aidan Cheslin from Bloomberg Intelligence joins Irene Garcia Perez, Eleanor Duncan and James Crombie with Bloomberg News to discuss the ongoing drama. Billionaire owner Patrick Drahi has taken a combative approach to creditors, who are joining forces in an effort to avoid steep losses. Credit rating downgrades and asset price falls at Altice France — which has more than €24 billion ($25.6 billion) in debt — make lenders cautious and undermine the ability of other risky companies to refinance debt. The French telecom is “teetering like a Jenga tower with unsustainable leverage and negative free cash flow,” according to BI’s Cheslin.

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Corporate debt markets are poised to perform well provided monetary policy doesn’t get tighter, according to Morgan Stanley. “As a credit investor, the thing that matters most is that the next Fed policy action is not a hike,” Vishy Tirupattur, the bank’s chief fixed income strategist, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Spencer Cutter. “The bar for a hike is very high,” he adds. Morgan Stanley still expects three rate cuts from the Federal Reserve this year, starting in July. Tirupattur favors leveraged loans, CCC rated bonds and debt from companies in the energy sector. Also in this podcast, Tirupattur discusses the private credit opportunity and commercial real estate risks.

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The threat of weak companies not being able to pay their debts is rising as interest rates stay elevated. “On high yield and loans, I do think that risks are growing that you could see a reset in spreads,” Meghan Robson, head of US credit strategy at BNP Paribas, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Holland. “The obvious trigger for us would be that debate of rate hikes coming back,” Robson says in the latest Credit Edge podcast. BNP favors shorting some single B and CCC rated issuers whose credit spreads have tightened alot. “If rate cuts do seem to be pushed off more and more, I think there could be a sell off there,” said Robson. In addition, BNP favors bonds rated BBB, flags high-yield debt in the media sector as an opportunity, and expresses caution on the financial sector, given the likelihood of an earnings drag if the Federal Reserve doesn’t ease. “The biggest risk we’re watching is a red wave,” says Robson, when asked about the impact of the US presidential election on credit markets.

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