B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM), the controlling shareholder in Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), is following in the footsteps of Internet Gold Ltd. (Nasdaq: IGLD; TASE:IGLD) by halting its payments to its bondholders. The company announced that it was beginning talks with the bondholders to consider all of its financial options.
The announcement is also important for bondholders in Internet Gold, the controlling shareholder in B Communications. Internet Gold's bondholders recently took effective control of the company after payments were stopped, following an unsuccessful attempt to sell Internet Gold's B Communications shares. Internet Gold's sole asset is now liable to be taken over by holders of bonds in B Communications, leaving Internet Gold's bondholders, who are owed NIS 722 million, with nothing.
The stocker.co.il website reports that the biggest holder of B Communications' Series C bonds is the Yelin Lapidot investment house, which held 9.3% of the series as of the end of 2018, followed by Meitav Dash with 4.3%. In Series B, which is smaller, the largest bondholder is Meitav Dash with 14.4% of the series, followed by Yelin Lapidot with 11.4% and Harel with 7.5%. As of the end of the third quarter of 2018, B Communications' debt was NIS 2.26 billion to Series C bondholders and NIS 226 million to Series B bondholders.
Some of these concerns also hold Internet Gold's bonds. For example, according to stocker.co.il, Meitav Dash is the leading bondholder in Internet Gold's Series D bonds with 9.8% of the series as of the end of 2018. Migdal is the largest holder of Internet Gold's Series C bonds with 3% of the series.
B Communications CEO Ami Barlev said, "Despite the possible deviation from the criterion, the company has sufficient liquid balances to service its debts until November 2021, over two and a half years from now, even without receiving any dividends from Bezeq.
"Furthermore, as of now, the company's asset value is positive. In addition, the company has excellent financial flexibility and available means of raising capital in accordance with the approval recently obtained from the Ministry of Communications. Free shares in Bezeq are also available for sale.
"The company believes that its main asset, Bezeq, is an important player in the communications infrastructure market. The company's situation allows to continue servicing its legal obligations. At the same time, we are aware of the substantial challenges and large-scale fluctuations that are likely to affect these figures, and are aware of the possible variables."
NIS 2.5 billion debt on the way to a settlement
The huge NIS 1.5 billion decrease in value that the Bezeq group is likely to recognize in its upcoming reports is of great concern the bondholders in to B Communications, It was reported today that a NIS 2.5 billion debt is on the way to a settlement. Yesterday, sources informed "Globes" that the worried bondholders were already beginning to organize, and had contacted Adv. Ophir Naor to represent them.
B Communications owes its bondholders NIS 2.5 billion in two bond series. The covenants for the bonds include a minimum equity of NIS 650 million for two consecutive quarters, while the interest rate rises if equity falls below NIS 750 million. There is also a condition concerning the debt rating, which means that a credit downgrade will mean serious trouble for the company.
B Communications recently raised NIS 118 million, thereby guaranteeing itself sufficient cash to service its debt until November 2021, even without any dividends from Bezeq. Bezeq is B Communications' main asset. A fall in Bezeq's profits and the dividends that it distributes will have a substantial effect on B Communications. The company's share price dropped 11.7% today following Bezeq's announcement.
Published by Globes, Israel business news - en.globes.co.il - on March 20, 2019
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