Following the decline in Bezeq Israeli Telecommunication Co. Ltd.'s (TASE: BEZQ) share price, the fate of the sale of the controlling core in the company will be decided in the coming days. The crucial question is whether, and at what prices, bids will be filed in the auction for selling the shares in B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM) held by Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD). B Communications holds the controlling interest in Bezeq.
In order to avoid a debt arrangement, Internet Gold has to sell its shares in B Communications at more than NIS 31 a share, while the current market price is NIS 18.80, meaning that the sale may be called off.
Submission of binding bids is scheduled to be closed at the end of the day. The current bidders are the York Capital and Searchlight Capital Partners. If the bids are too low, there is a reasonable possibility that Internet Gold will have to undergo a debt settlement procedure and be transferred to its creditors.
Bezeq last week warned of a possible substantial drop in value of its subsidiaries (of an unspecified extent), especially Yes (DBS Satellite Services). In response, Midroog downgraded its debt rating for B Communications and said that no dividend would be distributed in 2019, giving that the write-downs and provisions that Bezeq will make will eliminate its net profit in 2018 (dividends are distributed every six months on the basis of the profit for that period).
At the same time, Midroog predicted that Bezeq would be able to resume distribution of more substantial dividends in 2020. Leader Capital Markets Ltd. (TASE:LDRC, on the other hand, predicted yesterday that there was a growing likelihood that Bezeq would distribute a dividend in neither 2019 nor 2020.
There is no doubt that the auction is taking place under impossible conditions: Bezeq's share price has been plunging in recent weeks, while write-downs and employee retirement are affecting its future dividend. A senior Ministry of Communications executive took an aggressive attitude toward the company in a recent interview while due diligence was being performed, B Communications' credit rating was downgraded two days before the final week for accepting bids, and Internet Golds' bondholders and controlling shareholders, the special managers for Eurocom, exerted constant pressure during the auction. A sale of B Communications in these conditions is very unlikely.
Bezeq's share price hit a five-year low today, after dropping 35% in the past year. Internet Gold holds a 65% controlling interest in B Communications, which controls Bezeq with a 26% stake. Bezeq's subsidiaries include Pelephone Communications Ltd., Bezeq International, and Yes.
Published by Globes, Israel business news - en.globes.co.il - on January 15, 2019
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