Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) is not waiting for Eurocom's creditor banks to decide whether or not to support the company. Internet Gold, which controls Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), plans to make a NIS 33 million placement of shares and warrants this week. The amount raised could rise to as much as NIS 110 million if all the warrants are exercised.
Eurocom is controlled by Shaul Elovitch. A few weeks ago, it went into liquidation, and is in effect controlled by its three lender banks: Israel Discount Bank (TASE: DSCT), Bank Hapoalim (TASE: POLI) and First International Bank of Israel (TASE: FTIN). The banks appointed special managers to the company. Eurocom's main asset is control of Internet Gold.
Internet Gold is in a fragile financial state because of the fall in Bezeq's share price in the past few months. Its holding in Bezeq is Internet Gold's main asset, and the fall in its share price has brought Internet Gold's asset value to almost zero. The offering is intended to reassure the company's bondholders about the payments due to them next year. Assuming the warrants are exercised, these payments will be covered.
Eurocom's creditor banks are currently examining whether to support the company, but Internet Gold, run by Doron Turgeman, decided not to wait any longer but to raise capital itself. The question now is whether Eurocom's banks will participate in the offering, or forego it, in which case Eurocom's holding will be diluted.
Internet Gold's offering is led by Apex Issuances. The minimum price per share has been set at NIS 8.3, which represents a discount of 15% on the current market price. The company notified the Tel Aviv Stock Exchange that it had applied to the Ministry of Communications for a change in its permit to control Bezeq. It stated that it had asked the ministry for confirmation that "the Company and its subsidiary, B Communications Ltd. will continue to be considered controlling shareholders of the Bezeq group, as long as Eurocom Communications Ltd. and Shaul and Yossef Elovitch hold, taken together, 35% or more of the holdings in the Company." The minimum holding according to the permit is 50%.
Eurocom currently holds 54.7% of Internet Gold. The ministry does not approve Internet Gold's request, the warrants issued will be converted to shares in B Communications, through which Internet Gold controls Bezeq.
The capital raising exercise represents an opening for a future takeover of Bezeq at a low price. The (currently theoretical) possibility of gaining control of Bezeq through an investment of NIS 110 million is likely to prove attractive to several investors who have recently expressed interest in acquiring Bezeq, and market players say that there is interest on the part of several strategic investors in buying the package on offer in the placement.
Published by Globes [online], Israel business news - www.globes-online.com - on June 3, 2018
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