Apax Partners, managed by Zehavit Cohen, is in negotiations to acquire the Home Center chain, and is likely to submit a higher bid than the one submitted by Klirmark Capital. Eyal Fishman, who has been CEO of Home Center for the past two years, has held two meetings in recent days with Shay Aba, Cohen's deputy.
Headed by Raz Kafri and Ilan Levanon, Klirmark was founded nine years ago, and specializes in investments in companies in difficulties and companies with risky debt. Over the years, the fund has been mentioned as being interested in acquiring various companies. Among other things, it competed with Apax for the acquisition of the Globus Max chain of movie theaters, which was eventually sold to Elco Ltd. (TASE: ELCO) . Klirmark previously invested in debt of Africa-Israel Investments Ltd. (TASE:AFIL) and IDB Group.
Bank Hapoalim (TASE: POLI) and Israel Discount Bank (TASE: DSCT) were recently reported to have disagreed about selling the Home Center chain. Bank Hapoalim wanted to sell the retail chain, which belonged to the Fishman group, to Klirmark. Klirmark is believed to be willing to pay a price reflecting a 40% write-off of the banks' NIS 190 million debt. Discount Bank, to which Home Center owes NIS 50 million, opposes the deal. Discount Bank believes that the chain can be sold at a higher price, because it has been through a change and recovery plan, and has additional potential for improvement. Discount Bank wants its investment banking arm, Discount Capital, to try to find buyers at a higher price. In addition to its NIS 190 million bank debt, Home Center also owes NIS 50 million to its bondholders and tens of millions of shekels to the World Bank.
Bank Hapoalim, which is owed NIS 100 million by Home Center, holds a lien on most of Home Center's shares for the Fishman group's own debt to the bank. Since the Home Center chain is also in financial difficulties, in addition to the Fishman group's bankruptcy, the shares actually belong to the chain's bondholders, and the position of Home Center's creditors is therefore important in determining who will acquire it. While Home Center no longer belongs to the Fishman group, it is still managed by Eyal Fishman.
Two years ago, Home Center instituted a streamlining plan, and began selling over NIS 95 million in assets. Six of its branches were closed under this plan, two new branches were opened, its store space was reduced, and its rent was lowered, while operating, sales, headquarters, and logistics costs were cut. The cuts reached NIS 35 million, and 220 employees were laid off, reducing the number of employees to 1,550. Prices were cut and imports increased, while the chain's business was expanded into new fields.
The chain is still having trouble handling its debts, however. Early this month, Home Center reported a delay in payments to a fund for the bondholders, with the latter's consent. The payment, estimated at several million shekels, will be made in two installments: one this month and the second in November. The redemption date for the bonds is in November 2020. The current postponement took place two years after the company reached a debt settlement that includes rescheduling of its debt.
Published by Globes [online], Israel Business News - www.globes-online.com - on October 31, 2017
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