Citibank is demanding that Yitzhak Tshuva's Delek Group Ltd. (TASE: DLEKG) should make immediate repayment of its debt to the bank because of the steep decline in the prices of the company's securities.
Delek Group reports that several events have occurred that, under the loan agreements between the banks and the company and its subsidiaries, give the various banks the right to demand replenishment of collateral provided against the loans. In the case of a loan granted to Delek Energy on which the balance owing is $57 million, against which a lien was granted on participation units of Delek Drilling, Citibank claims that it has cause to present the debt for immediate repayment.
Delek Group has informed the bank that it disputes this claim, despite the decline in the group's securities as a result of the collapse of the price of oil to about $30 a barrel. Delek Energy has applied to the court for a provisional injunction, claiming that the consequences of the coronavirus outbreak and the deep crisis on the financial markets constitute force majeure. The court granted the injunction against Citibank. It will be in force until a further ruling is made.
Prices of Delek Group bonds fell about 10% this morning, and the yields to maturity on the bonds are 300-500%, reflecting the concern over the company's ability to repay the debt, or in other words, concern that a debt settlement is in store for the bondholders. The company needs to repay or recycle debt amounting to NIS 6.8 billion over the next three years, which at the moment does not look realistic.
Delek Group, whose business mainly consists of oil and gas exploration and production, has lost 80% of its value in the past month, among other things because of the steepest drop in the price of oil since 1991.
Delek Group said in response, "We are meeting all our commitments, and there is no cause for unilateral steps, particularly in a stormy period on the markets because of the coronavirus crisis and the volatility in the price of oil. The company continues to be focused on its aims and goals, subject to the global crisis that is affecting the entire industry. To anyone who fantasizes about harming us, we beg to make clear that Delek Group is strong and will get through the current crisis successfully."
Published by Globes, Israel business news - en.globes.co.il - on March 15, 2020
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