The bondholders of Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) voted on the bids submitted by businessperson Gad Zeevi and US investment fund Searchlight. Following a prolonged contest, 85% of the bondholders voted in favor of exclusive negotiations with Searchlight, which offered to buy a controlling interest in B Communications. Bezeq Israeli Telecommunication Co. Ltd.'s (TASE: BEZQ) share price jumped 6% on a turnover of over NIS 80.7 million, while Internet Gold's bonds were up 10%.
During the day, Zeevi tried to improve his bid a number of times. Among other things, in the final minutes of the auction, he sent a letter of intent from AON for providing up to NIS 700 million in financing. Sources inform "Globes" that although Zeevi's bid had higher rates of return, large investment institutions holding Internet Gold bonds were inclined to favor Searchlight's bid, because Searchlight had completed due diligence for Bezeq, while Zeevi had not yet begun it. The institutions believe Searchlight's bid therefore has more certainty about closing a deal.
Internet Gold controls 52% of B Communications, the controlling shareholder in the Bezeq group. Both Internet Gold and B Communications halted payments to their bondholders, following accounting write-offs by Bezeq.
"Globes" reported yesterday that the bondholders' meeting at which representatives of both Searchlight and Zeevi presented their bids, was tumultuous. "Globes" also reported that economic expert Avishai Ovadia, CPA, had said that Zeevi's bid was better, reflecting repayment of 60% of the debt, compared with 50% in Searchlight's bid. Ovadia was appointed as an expert by the court to assess the Internet Gold debt settlement. Internet Gold owes NIS 730 million to its bondholders, and has NIS 135 million in cash.
Searchlight's bid included a NIS 165 million payment to Internet Gold for its shares in B Communications, plus NIS 60 million to be paid to them in cash or in B Communications shares, making a total of NIS 225 million. This is equivalent to a total payment of NIS 360 million to the Internet Gold bondholders (including the company's cash), half of the company's debt to them.
Zeevi offered to buy ownership of Internet Gold for NIS 300 million, which Internet Gold would use to invest in B Communications in the framework of a financing round. The Internet Gold bondholders will be issued a new NIS 300 million bond series. Zeevi also offered an upside mechanism based on Bezeq's share price. According to the Black and Scholes model, this upside is worth NIS 30 million, bringing the value of Zeevi's bid to NIS 465 million.
Published by Globes, Israel business news - en.globes.co.il - on April 16, 2019
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