Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD), which, via B Communications Ltd. (Nasdaq:BCOM; TASE: BCOM), controls Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), reported yesterday evening that its board of directors had decided to halt payments to its series C and D bondholders and to enter into negotiations on a NIS 730 million debt settlement.
At the same time, as reported by "Globes" yesterday, Doron Turgeman, who has been serving as CEO of both Internet Gold and B Communications, announced that he would resign as CEO of B Communications and would continue as CEO of Internet Gold alone, because of the conflict of interests liable to arise in the future between Bezeq's two parent companies. Ami Bar Lev, who was serving as chairman of Internet Gold, resigned from that position and was appointed CEO of B Communications in place of Turgeman.
No binding bids were received in an auction that closed on Tuesday of the shares representing the controlling interest in B Communications, leaving Internet Gold unable to meet its obligations to its bondholders. Internet Gold's board therefore had no choice but to declare the start of talks with its bondholders (who are meeting today).
Yesterday, there were double digit falls in the prices of Internet Gold's shares and bonds. The bonds are being traded at astronomical junk yields, meaning losses totaling hundreds of millions of shekels to the bondholders. The trend in the bonds was positive today, but the yields on them remain very high.
The share prices of Internet Gold and B Communications rose today following their recent headlong slide, but the market cap of Internet Gold has still shrunk by 90% to NIS 92 million in the past year. B Communications' market cap has shrunk to NIS 565 million after a decline of nearly 70% in a year. The share price of Bezeq, the underlying asset of both companies (B Communications holds 26.3%) rose 2.35% today. Bezeq's market cap is NIS 9.4 billion, following a 35% drop in its share price in the past year.
Internet Gold mainly blames the failure of the auction of its holding in B Communications on worsening global and local market conditions, and the falls in the share prices of B Communications and Bezeq. As for future developments, sources at the company said these would partly depend on Bezeq's results, which will affect B Communications' shareholders' equity; meeting the requirement of the Concentration Law to remove a level in the control pyramid by December 2019; and limitations on raising capital from the public.
Internet Gold, which in effect now passes to the hands of its bondholders, has up to now been controlled by privately held Eurocom Communications. Until a few months ago, Shaul Elovitch controlled Eurocom, but in May last year a liquidation order for the company came into effect, because of a NIS 960 debt owed to the banks, after the banks decided not to hold a quick sale of Internet Gold. The creditor banks (Discount, Hapoalim, and Leumi) are represented on the Internet God board.
Internet Gold's bondholders want to maximize the amount they eventually receive. A market source said yesterday: "If anyone thinks that the bondholders will sell their holdings quickly and for peanuts - it won't happen." The same source said that they would probably wait for more reasonable pricing for Bezeq, the company's underlying asset.
Published by Globes, Israel business news - en.globes.co.il - on January 17, 2019
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