Within a year, about 100 companies, mainly technology companies, have held IPOs on the Tel Aviv Stock Exchange, raising over NIS 13 billion.
The surprisingly lively primary market has upstaged the debt raising activity by corporations, but this market too has enjoyed a period of intense activity, and the amounts raised are far larger.
Figures from rating agency Midroog show that the amount of debt raised in July, totaling NIS 11.6 billion, represents a peak not seen in Tel Aviv for eighteen months, and is 2.5 times the amount of debt raised in July last year.
Midroog CEO Avi Sternschuss says, "Given the low interest rates and spreads, the corporate debt market continues to be attractive for a wide range of issuers seeking to take advantage of the low yields and to issue new bonds with fairly long durations. We expect this to continue to characterize the bond market in the coming months as well."
Azrieli Group leads
Three particularly large debt offerings pushed the July figure upwards. The largest was by income producing real estate giant Azrieli Group Ltd. (TASE: AZRG), which raised NIS 3.6 billion, representing 30% of the monthly total.
After Azrieli Group come defense company Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) (NIS 1.9 billion) and Israel Electric Corporation (NIS 1.2 billion), together accounting for a quarter of the total debt raised on the local market last month.
With the intense activity in July, the aggregate amount of debt raised on the Tel Aviv Stock Exchange in the first seven months of 2021 came to NIS 35 billion, similar to the figure for the corresponding period in 2020 (NIS 34.5 billion), and slightly less than the NIS 37 billion raised in the first seven months of 2019.
Financial sector weaker
Thanks to Azrieli Group's huge offering, the real estate and construction sector accounted for more than half of the debt raised in July (NIS 5.6 billion). For the year to the end of July, the amount of debt raised by real estate companies is close to NIS 17 billion, 8% more than in the corresponding period of 2020.
Against the dominance of the real estate sector, the financial sector had a weak July, raising just NIS 300 million (for which Direct Finance (TASE: DIFI) was responsible), versus over NIS 2 billion in July 2020.
For the year to date too, this sector has been comparatively weak, raising less than NIS 2.5 billion, 70% less than in the first seven months last year. "The decline in offerings by this sector, which mainly consists of the large banks, was largely due to the high amounts raised last year," Midroog explains, meaning that the banks have adequate liquid reserves and do not need to raise more money at this stage.
More unrated offerings
Midroog's figures also show that "the broadening of the credit risk profile among issuers continues, with more offerings and issuers that are not rated." According to the figures, since the beginning of 2021, the proportion of issuers rated Aa (excluding financial companies) fell to 34%, from 41% in the corresponding period of 2020, and an average of 50% in 2018-2019. This, says Midroog, is because of "the improvement in market access for issuers of medium or less credit quality."
Unrated offerings represented 12% of the par value of debt issues in the first seven months of the year, which compares with 2% last year, and 7-8% in 2018-2019.
Published by Globes, Israel business news - en.globes.co.il - on August 3, 2021
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