The bond offerings by American real estate developers on the Tel Aviv Stock Exchange continue to run into trouble. After the painful failure last week of the attempt to raise NIS 3 billion debt for prestige property company Wharton Properties, and the relative failure of the offering by property developer MDG Real Estate Global, the offering by Copperline Americas has also been deferred because of low demand and the high interest rate being demanded of the company.
Coppelrine Americas, owned by the Schlesinger family, held the institutional stage of its initial offering in Tel Aviv, in which it sought to raise NIS 400 million in unlinked shekel bonds with a duration of 4.5 years that received an A rating from S&P Maalot.
The company received orders for bonds worth NIS 310 million and at the maximum interest rate offered in the tender, 6.5%, from mutual fund management companies, provident funds, and from nostro players. The big insurance companies were conspicuously absent, as they were from the Wharton offering. The interest rate is lower than that paid by Spencer Equity Group and The Leser Group in their recent bond offerings, but relatively high for a company that deals in rental property, where its profit derives from the spread between the yield on the property that it receives and the interest on the bond that it pays.
So, despite the demand generated for most of the amount, the Schlesinger family decided to halt the offering and not to continue with it at present, after the underwriter pricing the offering, Clal Finance Underwriting, managed by Tal Rubinstein, said that it was not possible to be sure of raising a further NIS 90 million in the public tender. The company was brought to make an offering in Israel by Yehonatan Cohen, a consultant who was until recently CEO of Clal Finance Underwriting
The cancellation of Copperline Americas debt offering is further evidence of the difficulties that US real estate companies seeking to raise debt in Tel Aviv are encountering, because of the falls on the capital market and the heavy redemptions from the mutual funds, which are the main players in such debt raising exercises. From the start, these companies offered interest rates higher than the rates paid by Israeli companies with equivalent ratings (as compensation for their unfamiliarity to investors), but the recent rise in yields, in Israel and globally, lessened their attractiveness, and meant that their owners were being required to pay substantially higher rates than they had expected.
Nevertheless, it is important to point out that Copperline Americas' offering prospectus enables it to complete the offering by October 7 (without having to update the prospectus) and it may consider doing so if it finds a way of reducing the interest rate that investors are demanding from it.
Copperline Americas has no development activity, and most of the offering proceeds, some $85 million, were earmarked for investment in buying the holdings of the partners in some of its assets, in paying off existing loans on the assets, and in renovating buildings in order to add 317 rental apartments and 60 stores to its portfolio.
Published by Globes [online], Israel business news - www.globes-online.com - on September 21, 2015
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