Published On: Mon, Apr 28th, 2014

Delek units set for biggest ever Israeli debt offering

Avner and Delek Drilling plan raising NIS 2 billion (about $570 million) from investors.

Yitzhak Tshuva

The energy exploration units of Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, are due to begin a road show for the biggest ever debt offering by an Israeli company. Tamar and Leviathan partners Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) plan to raise NIS 2 billion from investors in Israel, Europe, and the US.

 JPMorgan Chase & Co. (NYSE: JPM), Citigroup (NYSE: C), and HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC) are the underwriters.

Avner and Delek Drilling each own 15.625% of Tamar and 22.67% of Leviathan. They will use the proceeds from the offering to recycle existing debt borrowed by Barclays Bank (LSE: BARC) and HSBC to finance their $900 million share in the development of the Tamar gas field.

The debt will be raised in five bond series, which will not be listed for trading, and will have a duration of seven years. The collateral to the lenders will be the two companies’ rights in Tamar. The loans will be repaid from the cash flow from gas sales from Tamar.

S&P gives the new debt a BBB rating. Recycling the current debt will lower the financing to debt ratio for Tamar’s development, and leave Avner and Delek Drilling with $1.1 billion in extra cash. They will use this money for further development of Tamar and to finance their share in the development of Leviathan, which will cost $5 billion.

Published by Globes [online], Israel business news –

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