"Our main fear is that many of the companies that floated will be unable to service their debt to investors. (Supervisor of Capital Markets, Insurance and Savings) Yadin Antebi's plan does nothing whatsoever to address the ultimate nightmare for bondholders that there won't be anyone to claim payment of their debt from," says Menorah Mivtachim Provident Funds CEO Ronen Avigdor in an interview today with "Globes TV."
Globes: Do you consider the intervention by the Ministry of Finance in the trading in corporate bonds a success?
Avigdor:"Both institutional and private investors in corporate bond instruments have been hit extremely hard, so much so that the government realized it had no choice but to intervene. The intervention was successful because it created the incentive for institutional investors to buy new corporate bonds up to a potential total of NIS 14 billion. It was successful but it also has quite a few disadvantages."
If the economic crisis worsens, do you see the possibility of further intervention by the government in the bond market?
"Given the global crisis worldwide as well as the slowdown which is now reaching us, one cannot rule out the possibility that things could get worse. The crisis is worsening, not just because of economic reasons, but also because of public behavior. So it quite definitely could happen. In such an instance, I feel there would be a need for further intervention by the government, because what has been done so far isn't enough."
What, in your view, should the government not do under any circumstances?
"It is absolutely important not make an about-face on an entire decade of successful reforms in the government and corporate bond market. This market is flourishing, it is alive, very large in size and highly liquid. It has given investors a lot of satisfaction in recent years. Any element that contains a guarantee of returns to institutional investors or even additional elements of accounting that are not at market prices but rather at cost prices and suchlike, are problematic."
Menorah Mivtachim Provident Funds is a subsidiary of Menorah Holdings (TASE: MORA1;MORA5).
Published by Globes [online], Israel business news - www.globes-online.com - on November 10, 2008
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