The moment of truth for Yitzhak Tshuva-controlled Delek Real Estate Ltd. (TASE: DLKR is approaching. After meeting all its bond payments in the past three years, despite difficult circumstances, capital market sources believe that the company will seek to postpone its upcoming payment.
Delek Real Estate will reportedly ask its Series 25 bondholders for a 4-5 month delay in the NIS 300 payment due in September. Capital market sources believe that the bondholders will agree, and that they will be compensated through higher interest or increased collateral. The sources also believe that Tshuva will announce additional support for the company, to signal his confidence in it.
Delek Real Estate owes its bondholders NIS 2.1 billion, out of a total consolidated debt of NIS 15 billion. The company's cash reserves have run out, and it has a shareholders' equity deficit of NIS 1.3 billion. Under the circumstances, it is clearly unable to service its debt.
Assuming that the bondholders agree to the postponement, Delek Real Estate is supposed to prepare a comprehensive plan for dealing with its debt, which is based on its main assets. The company has two subsidiaries: Elad Israel Ltd. (formerly Dankner Investments Ltd.), which owns land in Israel; and Delek Global Real Estate Ltd., which owns a number of properties in Europe and Canada, headed by a portfolio of car parks in the UK, leased to National Car Park Ltd.
Any future debt settlement will probably include a debt to equity conversion, and a capital and assets injection by Tshuva. Capital market sources said that Tshuva plans to make an offer that will not include a haircut for the bondholders, and if they forego part of the debt, they will receive assets matching the amount foregone.
Delek Real Estate's share price rise rose 22.7% today to NIS 0.25, giving a market cap of NIS 80 million.
Published by Globes [online], Israel business news - www.globes-online.com - on July 20, 2011
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