Dark clouds are forming around the deal for the investment by the Searchlight fund and the David Forer family in Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) parent company B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM). Sources inform "Globes" that two of the largest B Communications' bondholders, Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and Altshuler Shaham investment house, are opposing Searchlight's investment in its current form and will vote against it if it is not changed by the vote two days from now.
Harel and Altshuler Shaham jointly hold 30% of the voting power in the Series C bonds(under the estimated voting rate of 80% of the bondholders). According to market sources, intensive talks have been taking place in recent days between Searchlight's representatives and senior representatives of these concerns, but no proposal has been received that will satisfy these investments institutions. Harel said today that no final decision on the matter had been taken yet, because talks were still being held with Searchlight.
The bondholders of B Communications (Series B and C bonds) and its parent company Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) Series (C and D bonds) are scheduled to vote on their agreement concerning the signing by the two companies of the investment agreement with Searchlight. At the demand of Searchlight, the majority needed for approving the decision is 75% of the total votes by participants in the bid (excluding abstentions), This means that without the support of Harel and/or Altshuler Shaham, the required majority for Series C of B Communications will not be forthcoming.
Last Thursday, B Communications's board of directors announced its support for the investment bid by Searchlight and Forer, and called on all of the parties involved in the deal to vote in favor of its approval. The company said that if completed, the deal would provide for an immediate injection of NIS 640 million into B Communications, which would stabilize and improve its situation. As a result, it will be possible to fully repay the balance of the debt to Series B bondholders, as well as early repayment of NIS 614 million to Series C bondholders.
At the same time, senior figures at Harel and Altshuler Shaham strongly oppose several of the accompanying clauses in the investment agreement. Among other things, they oppose Searchlight's demand for establishing an exit point from the agreement without a penalty if B Communications has less than NIS 685 million at the end of September 2019.
The two investment institutions also oppose Searchlight's unwillingness to provide a monetary trust deposit to secure the deal, and its agreement to pay the bondholders only NIS 30 million in compensation for abandoning the deal, and even that only upon proof of damage to the bondholders. It should be noted that already at the bondholders' meeting during the week preceding the discussion in the vote, a representative of Harel announced his opposition at the meeting, and it is possible that this encouraged representatives of Altshuler Shaham, who also voted against in the first indicative vote last month.
Published by Globes, Israel business news - en.globes.co.il - on June 16, 2019
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