On Friday, the trustees of Tao Tsuot Ltd. (TASE: TAO-M) bonds, Hermetic Trust (1975) Ltd. and Mishmeret Trust Company Ltd. together the bondholders' representative, notified the company and its board of directors that they should take personal proceedings against Tao controlling shareholder Ilan Ben-Dov.
Tao owes its bondholders NIS 500 million. The company's Series 2 and Series 3 bonds are traded at junk-bond yields of up to 240%. The company's Series 1 bond is traded at a yield of 4% because Bank Leumi (TASE: LUMI) fully backs the principal and interest payments on this bond. The other two bonds are backed by personal guarantees of Ben-Dov.
The Series 2 and 3 bondholders have taken a hard line against Tao and Ben-Dov in recent months, and have made serious accusations against both.
Tao has been troubled since 2008, but kept going until the second quarter of 2011, when its auditor attached a going concern warning to the company's financial report. The company's losses have resulted in a shareholders' equity deficit of NIS 400 million. The bondholders have rejected Tao and Ben-Dov's offers for a debt settlement.
Tao said in response, "The company has received the letter. It will study it and respond to the bondholders' representative."
Published by Globes [online], Israel business news - www.globes-online.com - on October 2, 2011
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