Sources inform ''Globes'' that Mekorot National Water Company is seeking to raise up to NIS 1 billion in bonds. The government company plans to raise the debt in a private placement. Standard & Poor's Maalot Ltd. has given the private bond an AAA rating.
However, since the process is still only in its initial stages, Mekorot has not yet decided whether to expand its current bond series or issue a new series. It has also not yet decided on the bonds' terms.
Mekorot declined to comment on the report.
Mekorot has eight private bond series, amounting to NIS 4-5 billion. If the offering materializes, demand will likely be strong, despite the market conditions, which are weighing on smaller companies attempting to raise capital. Besides Mekorot's perfect bond rating, it is a very low-risk company, nearly equivalent to a government bond, which makes it suitable as a long-term base in institutional investors' portfolios.
Mekorot's perfect rating is mainly because it is a government company. In a rating report last year, Maalot said, "The AAA rating is based on our assessment that because of Mekorot's critical importance to the State of Israel, and its very close ties with the government, there is a very strong probability that the State of Israel will grant extraordinary support, sufficient and timely, in the event of financial distress. We estimate Mekorot's independent rating in the group at AA."
Mekorot has several projects in the planning stages, including the Ashdod desalination plant, and the NIS 2.5 billion fifth line to Jerusalem. Last year, Maalot said, "We believe, on the basis of forecasts provided by the company, that Mekorot's internal sources in 2010-11 (its liquid portfolio and funds from operations) will service the debt to bondholders and capital expenditure even without reliance on raising capital in the capital market. However, the company will need to raise additional debt to invest in the development of new water facilities and to repay the balance of its commitments to the state."
Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2011
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