The first stage in Delek Royalties' two-stage offering was completed yesterday with the company raising $113 million (NIS 404 million) in the bond issue for investment institutions. Demand totaled NIS 900 million. Leading investment institutions took part in the issue, led by Leader Underwriters and Excellence Nessuah Underwriting.
Delek Royalties is a special purpose vehicle (SPV) founded by Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, in order to absorb the super royalties from the Tamar natural gas reservoir to which Delek Group's Delek Energy subsidiary is entitled.
The interest on the 4.7-year dollar-denominated bonds, rated Aa3 with a stable outlook by Midroog, was set at 5.48%.
After the public stage of the bond issue is completed, Delek Royalties is planning a third stage, probably next week, in which shares will be issued at a company value of NIS 700 million ($200 million), following which both the company's bonds and shares will be listed on the TASE.
As of the end of 2017, Delek Royalties was entitled to 1.5% super royalties on revenue from Tamar. The rate jumped to 6.5% in January, following the return of the investment in the huge gas reservoir.
As part of the measure, Delek Energy will sell the super royalties on revenue generated by Tamar to which it is entitled through a share issue in the SPV, to which 4.87% in rights will be transferred (starting at the beginning of 2018). After the measure is completed (contingent on the public holding at least 60% of the issued shares and obtaining approval from the Petroleum Commissioner), Delek Group, which holds 88.2% of Delek Energy's shares, will retain the right to receive royalties amounting to 1.6% of the revenue flow from Tamar.
Transferring the entitlement to royalties to the SPV is in exchange for cash proceeds to be paid to Delek Energy from the proceeds from the bond issue and share offering, and possibly also through an allocation of shares in the SPV to Delek Energy (up to 40%).
Investors were not overwhelmed by the success of the share offering; Delek Group's share price was down 2.2% today. The share has lost 26% of its value this year, pushing the company' market cap down to NIS 6.8 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on May 23, 2018
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