Israel Corporation (TASE: ILCO) subsidiary Israel Chemicals Ltd. (TASE: ICL) today announced that it will carry out a private placement with US investment institutions to raise $275 million in debt. The 7-12 year bonds, with an average of ten years, will bear an annual interest rate of LIBOR + 2.3%.
Citigroup Inc. (NYSE: C) and Bank of Tokyo-Mitsubishi UFJ handled the offering, which targeted US investment institutions.
The last time that Israel Chemicals raised debt in the US was in April 2004. In December 2011, it signed a $650 million five-year loan agreement with a banking syndicate that included Citigroup and the Bank of Tokyo-Mitsubishi.
There is a reason why Israel Chemicals is now seeking to diversify its credit sources and reduce its dependence on the Israeli bond market. In its latest financial report, the company said that it plans to execute its new Next Step Forward strategy, which includes a dual-listing on a major foreign stock exchange, probably either the London Stock Exchange or the New York Stock Exchange.
Israel Chemicals has also announced that it will consider either a share buyback or distribution of a one-time dividend of $500 million. Both measures require financial preparations.
The timing of the placement cannot ignore the upheaval in the global potash market since Russia's Uralkali (LSE: URKA) announced the breakup of the Russian potash cartel this summer, and its prediction of a 25% drop in potash prices to $300 a ton. Potash accounted for a third of Israel Chemicals' sales and 65% of its operating profit in the first half of 2013. As a mid-sized potash producer in the global market, Israel Chemicals usually closed contracts at the market price.
Published by Globes [online], Israel business news - www.globes-online.com - on November 7, 2013
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