Barclays Israel country manager Ilan Paz is full of praise for Israel's handling of the coronavirus crisis and its decision earlier this week to successfully raise $5 billion in government bonds, including its first-ever 100 year bond. "The State took a brave step here," he said, "As advisors we thought that it was the right thing in two senses: firstly, when you look at the relative situation in Israel compared with other countries around the world, and Israel's handling of this crisis, then it is clear to everybody in the world that Israel is leading in this field."
"Secondly, when an investors make investment decisions in normal times, they have lots of options, but today all the markets are blocked except this market for investments in the bonds of states and companies considered secure. Because of this investors are only ready to go into what is thought of as the best of the best. And by the way, in previous crises we saw that it was actually the strong bodies who went in first to the market who achieved the best terms while those who waited on the side unti8l the markets improved, achieved less good terms."
Paz continued, "The markets have taken a massive battering over the past month, and consequently the immediate response of investors was a total freeze. Slowly they began to open the markets to companies rate for investment. Markets such as equity offerings and bond issues for companies without an investment rating are something only relevant for perhaps five companies in Israel for which the global financing market is open to them."
"We are also seeing that very slowly other markets are being to open up, of course with terms far worse than those that these companies saw several weeks ago. A large distinction has been created here between the State and the five largest companies in the economy, which have access to the market, and all the rest - for whom the market is completely closed, or the prices are very high."
"In crises throughout history, we see that the return of investors to the investment market was gradual. First of all with the best and soundest companies, and very slowly they moved to more 'risky' companies, and the last companies to which the market opened up to was the new companies because investors don't know them."
"I don't know if we can say that we see the end but in my opinion the worst is behind us. You must remember that what is leading this crisis is not an economic factor. Here we have something exogenic, so we don't know where it is going to lead."
There is no doubt that the economic damage so far is only the start. There is damage to sectors that have always been considered the safest and most stable such as shopping mall owners, for example, that suddenly have no revenue, and energy companies whose customers are invoking force majeure clauses.
Published by Globes, Israel business news - en.globes.co.il - on April 2, 2020
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