Creditors of Optimum Communications have raised concerns over the telecommunications group’s use of antitrust laws as it seeks to avoid bankruptcy. On Friday, these creditors sought a dismissal of a lawsuit filed by Optimum in November, which accused several prominent asset management firms—including Apollo Global Management, Ares Management, and BlackRock—of engaging in an illegal cartel during debt negotiations.
The creditors argue that antitrust laws should not apply in this case, as they are bound by an agreement established last year to negotiate debt restructuring collectively with Optimum. Counsel for the investors stated that Optimum had received competitive terms from its creditors and that the notion of requiring competition among them over the restructuring terms is illogical.
The lawsuit has sparked debate in the $3 trillion market for U.S. junk bonds and leveraged loans, especially concerning Optimum’s position that creditor cooperation agreements could be illegal. Over 90% of Optimum’s debt is subject to such agreements, and the creditor group includes notable firms like Oaktree and JPMorgan’s investment management arm. They contend that these agreements are essential for reducing transaction costs and fostering mutual forbearance, which could facilitate continued operations for distressed borrowers.
The ramifications of Optimum’s complaint have led to significant repercussions, including the resignation of the law firm initially representing the company. Optimum has since enlisted White & Case to handle its debt negotiations. Meanwhile, a federal judge has scheduled a hearing for later this month to discuss the case.
Why this story matters:
- The outcome could set critical precedents in debt restructuring and antitrust interpretations.
Key takeaway:
- Cooperation agreements among creditors are viewed by some as essential for stability in distressed debt markets.
Opposing viewpoint:
- Optimum’s approach underscores potential misuse of antitrust laws, raising questions about creditor negotiations.
