By Giulia Morpurgo | Updated on Oct 06, 2026 at 05:23 PM
Ares Management Corp is set to lose about half of the hundreds of millions of pounds it invested in TalkTalk, after BT Group Plc agreed to buy the telecommunications firm out of insolvency .
The US asset manager received compensation of around £100 million ($133 million) in exchange for giving up its security over the company and consenting to BT’s purchase, according to people familiar with the matter, who spoke on condition of anonymity. Combined with interest and other repayments received over the years, that means Ares is set to recover around 50% of the cash it invested in the business, one of the people said.
The recovery of a “substantial portion” of the principal invested reflects “the strength of our structured contractual rights and the quality of our portfolio management capabilities,” a spokesperson for Ares said in an emailed statement to Bloomberg News.
But this amount is only a part of what Ares has invested in TalkTalk over the years, and an even smaller share of what it would have been owed had the investment performed as expected. In fact, when taking account accrued interest, Ares’ exposure to TalkTalk was in the region of £1 billion, according to filings and Bloomberg calculations.
The LA-based firm took a £50 million minority stake in early 2021, as part of a buyout led by private equity firms Toscafund Asset Management and Penta Capital, and backed by TalkTalk’s founder Charles Dunstone. Since then it has injected funds across the capital structure, becoming a creditor at both senior and junior levels as well as a shareholder. The investment was spread across various vehicles managed by Ares.
Notably, the financing also included a payment-in-kind facility to one of TalkTalk’s holding companies to help fund the take-private, according to filings. So-called PIK features allow the borrower to pay interest with extra debt, rather than cash. As a result, the amount due to Ares — net of earlier repayments — has ballooned to over £600 million since, according to filings and Bloomberg calculations.
As that debt sits further away from the assets, it ranks junior to the amount owed at the operating level, meaning it has lower repayment priority.
A spokesperson for BT declined to comment.
On Monday, BT announced it was going to buy TalkTalk’s wholesale and consumer businesses via a pre-pack administration, after a process to sell them as a viable business was unsuccessful.
TalkTalk had been struggling for years under the weight of a debt pile that became harder to maintain as its consumer base shrank. The UK telecommunications industry has been undergoing a shift from copper wires to fiber, requiring a high level of investment, especially given the strong competition in the sector. Many peers have struggled to keep up with their debt piles, and had to restructure them.
Over the years, as the company grappled with dwindling cash flow and rising financial distress, Ares repeatedly stepped in to provide emergency funding, increasing its exposure to TalkTalk while trying to keep it afloat.
It sought to protect itself by ensuring that successive cash injections ranked increasingly higher in the repayment order, looking to limit downside risks in an insolvency.
The alternative asset manager led a nearly £235 million funding injection in 2024, with other shareholders also committing some equity, as part of a deal with creditors to get them to extend debt maturities. At the time, the company was looking for some breathing room as it was in talks with Macquarie Group Ltd over a potential sale of the wholesale business unit, which subsequently failed to materialize.
The following year, Ares and other lenders provided around £72 million of so-called 1.5 lien financing — debt that ranks between first- and second-ranking claims in the event of a restructuring.
Last March, as TalkTalk’s issues mounted with no sale in sight, Ares contributed to a £65 million super senior facility, first in line of repayment in case of insolvency.
In this most recent sale process for TalkTalk’s divisions, Ares pitched to buy the consumer operations, while private equity firm Epiris bid for the wholesale activities, the people said. BT, however, eventually scooped up both.
Other creditors are also facing losses. As part of the BT acquisition — which is happening on a debt-free basis — creditors of TalkTalk’s around £628 million first-lien bonds and around £332 million second-lien securities saw their holdings wiped out in full. The first-lien bonds were quoted at around 65% of their face value just a month ago, according to pricing compiled by Bloomberg.