Yitzhak Tshuva's moment of truth on Delek Real Estate Ltd. (TASE: DLKR) is closer than ever: the company will submit a NIS 2.1 billion debt settlement offer next week. The bondholders will take a haircut of hundreds of millions of shekels on their bonds, which are currently trading at junk-bond yields of 1,300%.
The proposed settlement has three parts: the issue of a new bond to replace the current bond series with a massive rescheduling of payments; conversion of debt to equity; and a capital injection by Tshuva, estimated at hundreds of millions of shekels.
Prof. Amir Barnea, the architect of the multibillion debt settlement for Lev Leviev's Africa-Israel Investments Ltd. (TASE:AFIL) in 2010, was asked to formulate Delek Real Estate's settlement.
Delek Real Estate's market cap has fallen from NIS 4.6 billion in 2007 to NIS 75 million today. The company's accumulated losses since 2008 exceed NIS 3.5 billion, and its shareholders' equity deficit is NIS 1.7 billion. Its auditors attached a going concern warning to its previous financial reports.
Tshuva also owns 64% of the thriving holding company Delek Group Ltd. (TASE: DLEKG), which has a market cap of NIS 9.5 billion. Its businesses include oil and gas exploration companies Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L), fuel and refining companies Delek Israel Fuel Corporation Ltd. (TASE: DLKIS), Delek US Holdings Inc. (NYSE:DK) and Delek Europe BV, insurance company The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and Ford and Mazda importer Delek Automotive Systems Ltd. (TASE: DLEA). Delek also owns half of IDE Technologies Ltd., which has stakes in desalination plants. Tshuva bought out Delek Group's stake in Delek Real Estate to separate the troubled company from his other businesses.
Published by Globes [online], Israel business news - www.globes-online.com - on November 17, 2011
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