Chaim Katzman, controlling shareholder in Norstar (TASE: NSTR), through which he controls international income producing real estate company G City (formerly Gazit Globe) (TASE: GCT), is making a significant move that will benefit Norstar’s bondholders. Norstar’s board of directors reported a plan yesterday designed "for the bolstering of the company’s financial strength". It consists of a substantial injection of capital into Norstar by Katzman, an offer of full redemption of one of two bond series, and an offer of voluntary replacement of the second series with a new series secured on shares in G City.
In recent weeks, G City, Norstar’s main asset, has suffered from a worsening of its business position because of high debt and slow recovery in its various assets. Among other things, the company was hit by a downgrade in its credit rating from Midroog, with the rating agency expressing concern at the rise in its leverage. As a result, some of G City’s bonds reached yields of around 13%. The yields to maturity of the two bond series of Norstar itself (11 and 12) were at 26.5% and 24.5% respectively before the board’s announcement. In the past few weeks they have reached levels of over 60%.
Katzman, who serves as deputy chairman and CEO of Norstar, intends to inject NIS 90 million into the company as part of a process of expanding its capital. In addition, the series 11 bond, amounting to NIS 327 million, will be redeemed in full.
At the same time, Nortsar is examining the possibility of issuing a new bond series (13) secured on shares in G City. Norstar will offer series 12 bondholders, who are owed NIS 364 million, the opportunity of voluntarily exchanging their bonds with the new series at the same value. The shares of G city will be offered as security at a price per share of NIS 12.35.
The proposal has put new life into the group’s securities. The prices of Norstar’s bonds shot up yesterday, by 12% for the 11 series and by 12% for the 12 series, bringing the yield on the 11 series down to 7.7% from 26%, and the yield on the 12 series down to 16.8%. Norstar’s share price rose 13.17% by yesterday’s close, giving it a market cap of NIS 734 million, while G City’s share price rose 16.68%, giving it a market cap of some NIS 2.5 billion. On the Tel Aviv Stock Exchange this morning, G City’s share price is down 1.92% at NIS 14.82, and that of Norstar is down 1.01%, at NIS 17.61.
Published by Globes, Israel business news - en.globes.co.il - on January 10, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.