Bondholders could stop Saban buying Partner

Ilan Ben-Dov will have to achieve a high, if not full, repayment of Scailex's bond debt, otherwise the bondholders will reject the deal.

Two months after the collapse of the sale of control of Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) to Hutchison Whampoa Ltd. (HKSE: 0018), Haim Saban is in talks to acquire the Orange franchisee from Ilan Ben-Dov.

In a notice to the TASE today, Partner's parent company, Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF) said, "Since receiving notification of the cancellation of the Hutchison deal, the company has been seeking various deals, both financing and with regard to its holding in Partner Communications. As part of this activity, the company is in contact with Saban Capital Group, while also reviewing other deals with other parties. However, no agreements have been reached with any party, and there is no certainty that these talks will result in a binding transaction."

Sources close to the deal believe that the talks are in an advanced stage, and that there is a good chance that they will be completed soon. Ben-Dov reportedly will remain a shareholder in Partner alongside Saban, although nothing has been decided yet.

Ben-Dov still believes in Partner, and if he could keep his entire stake in the mobile carrier, he would do so. Therefore, any deal in which he will keep a large as stake as possible while enabling him to repay his bond debts on time is good. As of now, Scailex owns 16% of Partner which is not attached to creditors. Scailex will attempt to sell this stake for as much as possible in order to meet next year's payments. Only towards 2014, when it will repay its $300 million sellers loan to Hutchison Telecommunications International Ltd. (NYSE: HTX; HKSE: 2332), will it be able to sell the rest of its stake, which is attached to creditors, in Partner, a measure which will require their approval.

In response to the reports, prices for Scailex's bonds jumped, on the assumption that the sale of Partner shares will enable Scailex to meet its large bond payments over the next two years, without the need for a debt settlement. The company owes NIS 2.7 billion, and the watershed for the bondholders is a share price of NIS 28 for Partner. If it can sell all its Partner shares at this price, it will make almost NIS 2 billion.

It is important to note that Scailex's bondholders must approve any deal that includes the sale of the controlling interest in Partner, Scailex's main holding, and Ben-Dov will have to achieve a high, if not full, repayment of the bond debt, otherwise the bondholders will reject the deal.

A new investor in Partner will also benefit Hutchison, whose liens on Partner only cover a third of the seller's loan. Any deal which injects capital into Scailex for the sale of unattached Partner shares is good for Hutchison. Hutchison will also have to approve a deal that includes the full sale of Partner, in which case Ben-Dov will have to submit a structure that satisfies it, too.

Scailex's unsecured long-term bondholders are liable to pay the price if no sale is reached for Partner. Scailex is due to repay these bonds in 2015-18, when it may have no money to meet the payments.

Ben-Dov will have to find another solution for the bondholders of Scailex's parent company, Suny Electronics Ltd. (TASE: SUNY). This is reflected in Suny's bond prices, which remained unchanged following the reports about the Partner-Saban deal.

Saban approaches Deutsche Bank for financing

To finance a Partner takeover, Saban has approached Deutsche Bank to organize a NIS 700 million financing package from Israeli banks, and Deutsche Bank is working to create a syndicate. Saban will reportedly finance 60% of deal with equity and 40% with outside financing. Saban Capital president and COO Adam Chesnoff was in Israel last week for the talks.

Sources close to Saban told "Globes" today that he believes that Israel's mobile market will consolidate quite soon, which will affect Partner's share price on the TASE, which rose 7.4% today to NIS 21.70. They said that Saban believes that Israel will ultimately have five carriers, plus mobile virtual network operators (MVNOs), and that the regulator will have to intervene in these changes to rebuild the sector after the blows it has received.

Saban's aides believe that the Israeli telecommunications market will stabilize with 3-4 large groups, and that Partner, like the mobile market as a whole, will undergo massive restructuring in order to keep its profitability. Saban therefore believes that he can greatly contribute to restructuring Partner and prepare for future challenges.

In other words, the sources say that Saban believes that he has the managerial capability that Ben-Dov lacks, and that the market will appreciate his control of Partner. They also believe that Partner CEO Haim Romano will keep his job.

Published by Globes [online], Israel business news - - on October 14, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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