Sources inform "Globes" that Israel Electric Corporation (IEC) will receive a bridge loan of $500 million from the overseas underwriters advising it on its planned offering.
IEC is due to raise $1 billion in the US this year, as part of a new overseas fund raising program of $6 billion.
The tender for underwriters to lead the offering was won by Citi and Barclays Capital. "Globes" has learned that IEC added as one of the conditions of the tender a requirement for a bridging loan until the money from the planned offering was received. The loan is flexible in its term and is at a "very low" rate of interest, according to capital market sources.
The financial strength of the foreign underwriters enables them to provide the loan, whereas most local underwriters would not be able to grant such a large loan. IEC had hoped to proceed with the offering in May. The corporation is waiting for a decision by the credit rating agencies on a rating of its debt, which should be published after the electricity tariff is updated at the beginning of April. IEC's credit rating was put on a watch list after the revelation of its cash flow gap.
"Globes" reported in the past that IEC had concluded that it would currently be possible to raise the amounts it required overseas at the relatively low rate of about 6%. IEC believes that the closing of spreads in the US corporate bond market creates an opportunity to raise money at low rates. The overseas fund raising is to be secured by a floating charge on the corporation's assets, as in past fund raising exercises overseas.
Last year, IEC raised NIS 9 billion with state guarantees, and is finding it hard to raise further amounts without guarantees. An unsecured offering by the company last November at an interest rate of 6.5% met with only partial demand from the institutions. Past offerings by the corporation also closed at exceptionally high rates, because of the global financial crisis. In 2009, for example, the corporation had to pay 9.55% on a $500 million offering.
Published by Globes [online], Israel business news - www.globes-online.com - on March 21, 2013
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