Britain’s wealthiest are voting with their feet

One thing to start: Altice USA, the US telecoms affiliate of billionaire Patrick Drahi’s empire, has sued creditors holding the bulk of its $26bn debt, accusing them of illegally colluding in an attempt to force the company into bankruptcy.

In today’s newsletter:

British wealthy make departure plans ahead of Budget

Today UK chancellor Rachel Reeves will unveil her second Budget since the Labour party swept into power in the summer of 2024.

While the country is braced for a smorgasbord of tax increases to plug a fiscal gap, some of Britain’s wealthiest have voted with their feet.

James Brocklebank, a top dealmaker at the US private equity group Advent International, is leaving the UK for Luxembourg, DD’s Ivan Levingston and Alexandra Heal revealed on Tuesday.

He joins other big names to leave the country over the past year such as Revolut co-founder Nik Storonsky, steel billionaire Lakshmi Mittal and Egyptian industrialist Nassef Sawiris.

Prime Minister Keir Starmer and his government have tried to play down the exodus.

However, the departures have crystallised worries that Labour’s plans would lead London’s elite residents to flee and damage the local financial ecosystem.

Some of Reeves’ policies that have affected top business people include a carried interest tax increase and hitting private school fees with value added tax.

But wealthy international Londoners have most hated the abolition of the “non-dom” regime that had allowed British residents who declared their permanent home as overseas to avoid paying UK tax on foreign income and gains. In particular, they despised the fact that Reeves slapped inheritance tax on their global assets.

In today’s Budget London’s wealthy can look forward to a potential “mansion tax” on homes worth more than £2mn. Lawyers also speculate the government might make it harder for salaried members of partnerships to avoid paying certain taxes, a loophole closure that could impact law firms and buyout groups among other LLPs.

Sawiris, Egypt’s richest man, told DD earlier this year that Reeves was missing an opportunity to accommodate wealthy individuals given that the ample taxes they pay could help fund public services.

“High net worth or wealthy entrepreneurs have options. She should treat them like they are her best clients,” he said.

London’s loss has been the gain of other locales including Milan, Abu Dhabi and Monaco.

In Italy, where many wealthy foreigners have relocated, the country is aiming to increase its flat tax on the foreign income of wealthy individuals who relocate to the country by 50 per cent to €300,000.

In London, the shift is being felt everywhere from Mayfair’s private members’ clubs to the market for butlers. But the real fear is it will lead to less investment and decrease the city’s competitiveness as a financial hub.

Meanwhile, DD hears the new members’ clubs in Milan are packed.

EQT’s Colisée joins list of French restructurings

French companies are having a tough run, as economic shocks have left lenders circling distressed businesses.

In the country’s latest high-profile restructuring, Swedish private equity firm EQT is preparing to hand creditors ownership of its nursing home group Colisée.

Lenders including Blackstone and KKR will take control of the group, inject more than €250mn of funding into the company and claim 100 per cent of its equity. A third of Colisée’s €1.8bn debt stack will also be wiped out.

Earlier this year creditors rejected EQT’s offer to recapitalise the group with a €250mn cash injection.

Risk-averse loan funds dumped the company’s debt as its financial performance worsened this year. Colisée’s €1.2bn secured loan is trading at just 55 cents on the euro.

The nursing home group joins a number of distressed French companies, including retailer Casino, that are at odds with creditors. Casino is on course for its second debt restructuring in less than two years with a proposed €300mn injection from majority shareholder Daniel Křetínský.

Care home provider Orpea and Patrick Drahi’s telecoms company Altice have also restructured in France in recent years.

If EQT isn’t careful, another of its companies could join that list. 

Cerba, a laboratory company that EQT bought in 2021, has struggled to maintain the high levels of profitability it enjoyed during the Covid-19 boom in medical testing.

Its secured bonds are trading at 73 cents on the euro, while its unsecured debt is trading at about 13 cents on the euro, as lenders expecting heavy losses have sold out.

With its own €4bn debt pile, Cerba’s creditors — and of course, advisers eager for lucrative restructuring fees — are watching the situation closely.

Companies sour on ‘crypto treasury model’ amid bitcoin rout

A particularly frothy corner of the cryptocurrency market is facing a swift reckoning.

Digital asset treasury companies, also known as DATs, exploded in popularity this year. They’re essentially crypto-hoarding plays, where companies buy tokens as a way to give equity investors exposure to digital currencies.

While the price of bitcoin was riding high, many DATs traded at premiums. Since bitcoin’s latest rout, however, the “business model” is falling apart.

Michael Saylor famously pioneered the tactic with Strategy, the largest corporate holder of bitcoin. Other companies soon followed suit.

Dying microcaps in sectors such as biotech, film production and even vaping pivoted to buying crypto to boost their stock prices.

Investors in these companies have seen about $77bn of stock market value erased from a peak of $176bn this summer. Strategy’s own shares have fallen about 50 per cent over the past three months.

In many cases, the shares are worth less than the crypto tokens held by the company.

That’s because DATs raise debt and equity to buy tokens and some have used leverage to increase their crypto exposure. Thus, share premiums when the underlying assets are up can quickly turn into bumpy losses when they aren’t.

Now, many are doing exactly the opposite of the crypto treasury model: they’re selling the coveted tokens and buying back shares.

Job moves

• Lazard has appointed Paolo Battaglia as a managing director in the firm’s global industrials group in New York. He was most recently a managing director at Goldman Sachs. Lazard also confirmed previous reports that former Bank of America executives Bill Young and Jean Greene are joining as managing directors, also in the global industrials group in New York.

• New York City mayor-elect Zohran Mamdani has named Kathy Wylde, outgoing head of CEO group the Partnership for New York City, to his transition team.

• Weil, Gotshal & Manges has elected 17 new partners from offices including New York, London and Paris. The group includes seven attorneys from the private equity and M&A teams.

Smart reads

Not legal advice Big Law partners want to cash in on the valuable stakes they hold in their firms, Lex writes, and private equity has some schemes to make it happen. But what about the venerated law firm partnership model?

Top marks Apollo-chair-turned-sheriff-of-Wall-Street Jay Clayton says he’s scrutinising private asset valuations, Bloomberg reports, as credit markets show signs of stress.

Public policy US President Donald Trump’s markets regulators are trying to bring back IPOs. It’s a worthy aim, FT Opinion writes, but the Maga cure may be worse than the disease.

News round-up

ECB scrutinising claims Deutsche Bank underplayed financial risks (FT)

Schroders chief warns against calling ‘death’ of London equity market (FT)

New ABN Amro chief to axe almost a fifth of staff (FT)

Klarna launches stablecoin to cut cost of cross-border payments (FT)

TSMC sues former top executive who joined US rival Intel (FT)

Grim retail sales data fuels concerns about health of US economy (FT)