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Yitzhak Tshuva tests water for debt offering

Two-and-a-half years after the NIS 1.4 billion haircut in Delek Real Estate, Yitzhak Tshuva’s Delek Group seeks to make a bond issue.

Yitzhak Tshuva


Two-and-a-half years after the debt settlement in Delek Real Estate, Yitzhak Tshuva once more seeks to raise money on the capital market, through Delek Group Ltd. (TASE: DLEKG), which he controls. Yesterday, the company released a presentation designed “to test the possibility of a public bond offering.”

The bond that Delek Group seeks to issue is not secured, apart from a negative lien. Series 31 is shekel-denominated, with a duration of 6.9 years, and series 32 is index-linked, with a duration of 7.3 years. With both series, repayment will be in installments between 2020 and 2025. The bonds have received an A rating from S&P Maalot, which said that the proceeds of the offering would be used to recycle debt.

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Sources at Delek Group explained that the offering stems from a wish to diversify the group’s sources of finance and to benefit from the low interest rate environment that currently prevails on the capital market. CEO Asi Bartfeld recently said that “Delek Group is not thirsty for cash, after a series of sales of holdings since early 2013, which brought in NIS 6.5 billion.”

Delek Group’s total debt to bondholders is currently about $1.23 billion ($1.56 billion capital and $358 million future interest payments). Its bonds are traded at yields of up to 2.3% for index-linked bonds. Although Delek Group has refrained from making debt offerings recently, probably out of fear of the market’s reaction, last year two energy exploration partnerships controlled by the group, Delek Drilling and Avner Oil and Gas, raised $2 billion in a successful international debt offering.

In September 2012, after over a year of talks and legal proceedings, a debt settlement was approved in Delek Real Estate, which had been part of Delek Group but was spun off through a distribution of a dividend in kind and passed to the direct ownership of the group’s shareholders, headed by Yitzhak Tshuva. The debt settlement was one of the largest ever on the local capital market. The company’s bondholders forwent 65% of a debt ofabout $551, 000, that is to say, they sustained a NIS 1.4 billion haircut. Delek Real Estate got into difficulties at the end of 2008 after the global financial crisis caused a sharp fall in the value of its assets, but it has made some profitable exits since the debt settlement.

At the height of the negotiations over the debt settlement, in December 2011, “Globes” asked investment institutions whether what happened with Delek Real Estate would affect their willingness to participate in future debt offerings by companies under Tshuva’s control. The response was that the behavior of the company and its controlling shareholder in the debt settlement would be a consideration in any future investment decision. Some said that unless the settlement was to their liking, they would not participate in any offerings by Delek Group.

The Andorn committee examining debt settlements in Israel, which released its final report in November, recommended disclosure of the past conduct of the controlling shareholder in a company in circumstances of financial difficulties, as this represented an important consideration in weighing investment in a company and the risk involved.

Since the Delek Real Estate settlement, however, Delek Group has become an energy giant, and not just by local standards. Senior managers in investment institutions, asked in general about the matter, now tend to say that every case will be examined on its merits, and that foregoing an offering because the controlling shareholder had a problem in the past could turn out to be a mistake.

Published by Globes [online], Israel business news – 



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