Less than five months after the debt settlement in the company, Alon Israel Oil Company Ltd. is about to carry out one of the most important parts of it: raising at least NIS 120 million in a public share offering at a minimum company valuation of NIS 200 million after money. Alon Israel published a prospectus yesterday for an issue of new shares that will form 60% of its share capital. In addition, under the terms of the debt settlement, the company's bondholders will receive 25% of the shares after the issue. Existing shareholders Shraga Biran and the kibbutz purchasing organizations will be left with a holding of 13.7%. The remaining 1.3% will go to CEO Avi Geffen and chairman Yehoshua (Shuki) Oren. The offering will be led by Discount Underwriting, headed by Tzahi Sultan, the aim being to begin a road show before the Jewish New Year (September 21) and to complete the offering before Yom Kippur (September 30).
The debt settlement stipulates that unless Alon Israel completes an offering of at least NIS 120 million by October 1, ownership of the company will pass entirely to the bondholders.
Alon Israel has undergone many upsets in recent years because of its high leverage and erosion in the value of its assets. The group had to deal with the collapse of retail chain Mega, which led to loss of control of it and of Blue Square Real Estate.
According to the prospectus, after the debt settlement, Alon Israel's debt to its bondholders stood at NIS 1.5 billion at the end of June this year. In addition, it owed NIS 30 million to Bank Hapoalim (TASE: POLI), and NIS 103 to the Israel Tax Authority.
These debts are meant to be serviced from four main assets one of which is to be held for the long term, one for about two years, and two that are designated for sale in the coming months. Any asset sale will be used for early repayment of the debt to the bondholders.
According to Geffen, together with the company's cash and the proceeds of the share offering, the economic value of the group's assets will be NIS 2 billion, versus liabilities of NIS 1.6 billion, giving a net asset value of NIS 400 million.
The asset that Alon Israel intends to hold for the long term is 79.6% of Alon Natural Gas Exploration Ltd., which holds 4% of the Tamar gas reservoir. This company has a market cap of NIS 840 million, so that Alon Israel's holding is worth NIS 670 million, but its management believes that this represents a substantial discount on its true value, given the value of recent deals involving Tamar.
The asset that Alon Israel intends to hold for two years is 7.4% (six million shares) in Delek US, which has a market cap of $154 million.
The assets that will be for immediate sale are 8% of fuel stations company Dor Alon and 56.8% of Canada Israel Highways Management, which operates and maintains Highway 6 and the Carmel Tunnels. Alon Israel expects to receive NIS 196 million from the sale of these companies by the end of 2017.
According to Geffen, there is considerable potential for enhancement of Delek US in the next two years, after it bought Alon USA two months ago. The merged company operates four oil refineries in Texas, Louisiana and Arkansas, and holds another three in California that stopped operating in 2012. The two refineries in Texas are situated a long way from the Gulf of Mexico, one in Taylor and the other in Big Spring, and so were not damaged by Hurricane Harvey that hit the region last month. Geffen says that the hurricane benefitted the company, as 17% of the fuel production capacity of the US was knocked out by it, whereas Delek US was unaffected, while fuel prices rose to $28 a barrel for gasoline and $24 a barrel for diesel compared with $11 a barrel previously.
Published by Globes [online], Israel business news - www.globes-online.com - on September 11, 2017
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