Dayan family seeks slice of Delek Drilling via Citi

Tamar field Photo: Albatross

Citi holds a lien on part of Delek Group's holding in Delek Drilling, but at present is prevented from realizing it by court order.

Pressure on Yitzhak Tshuva and Delek Group Ltd. (TASE: DLEKG) is increasing. Delek Group reported yesterday that US bank Citi had contracted an agreement to sell 12% of the Delek Drilling partnership's capital, attached as collateral for the loan taken from Citi by Delek Group (through subsidiary Delek Energy). Delek Drilling engages in oil and gas exploration through holdings in the Leviathan and Tamar natural gas reservoirs.

The buyer in the deal is a family company whose beneficiaries are members of the Dayan family, which owns large real estate, hotel, and vehicle businesses in Israel and elsewhere. The consideration in the deal was set at $57 million (NIS 213 million), equal to the balance of Delek Group's debt to Citibank. This is 45% less than today's NIS 390 million market value of the participation units on the Tel Aviv Stock Exchange (TASE).

Completion of the deal is contingent on removal of the temporary injunction issued yesterday by Tel Aviv District Court president Judge Orenstein at Delek Group's request. In an announcement to the TASE, Delek Group said that Delek Energy "strongly opposes the validity and legality of the deal, and will continue to use all means at its disposal to make sure that it is rendered void ab initio."

Orenstein issued the ex parte injunction yesterday preventing Citi from selling shares of Delek Drilling attached in favor of Delek Energy. The attached shares are collateral provided by Delek Energy to secure a loan taken from Citibank, the outstanding balance of which is $57 million.

Plunging Delek shares, bonds

The price of the participation units of Delek Drilling has plunged 68% since the beginning of the year in response to the global outbreak of the coronavirus and the steep fall in oil and natural gas prices. These price falls have driven the market cap of Delek Drilling down to NIS 3.25 billion.

Delek Group holds 59% of the participation units in Delek Drilling, with a current market value of NIS 1.92 billion. Delek Group says that it will suffer unimaginable damage if Citi sells the participation units at the current very low prices. "This does not refer merely to the direct damage resulting from the sale of collateral at a temporary low point, but also to a chain reaction liable to cause huge damage to Delek Group's shareholders and creditors," the petition for the restraining order states.

The precipitous drop in the prices of the shares and bonds of Delek Group, whose current market cap is only NIS 730 million, reflects the market's belief that the group is headed for a huge debt arrangement. Delek Group's debts to its bondholders and the banks total NIS 9.2 billion.

Published by Globes, Israel business news - en.globes.co.il - on March 16, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Tamar field Photo: Albatross
Tamar field Photo: Albatross
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