Seven and a half years have passed since the debt settlement in Delek Real Estate was completed, in which the company's bondholders lost 65% of a NIS 2.15 billion investment. It now appears that another, much larger, debt settlement may be in store, this time in Delek Group itself.
For several years after the settlement, it appeared that Delek Group controlling shareholder Yitzhak Tshuva had found success, primarily because of the natural gas discoveries in Israel and the improvement in real estate markets in Israel and overseas. He now finds himself in the center of the current crash on the Tel Aviv Stock Exchange (TASE), with the share prices of Delek Group plunging.
Delek Group's share plummeted today, following several days of steep falls, with the same trend in the company's bonds, together with the entire oil and gas sector on the TASE. The price of oil sank 10% in New York on Friday, with the Organization of Petroleum Exporting Countries (OPEC) and Russia having trouble achieving an understanding on cuts in oil production. Global demand for oil has fallen sharply in recent weeks.
The market believes that the steep fall in the value of Tshuva's marketable holdings have put his company close to failing to comply with its financial covenants towards its creditor banks.
Market sources estimate Tshuva's personal debts to the banking system - as far as is known to Bank Hapoalim, Israel Discount Bank, and Mizrahi Tefahot Bank - at NIS 1-1.5 billion.
Delek Group's share price fell 30% today, and has lost 60% of its value since the beginning of the year, driving its market cap down to NIS 2.5 billion. The company's share has now reverted to its level of August 2009. Tshuva personally holds 62% of Delek Group's shares (attached in favor of Bank Hapoalim to secure a debt since he acquired control of Delek Group in 1998), with a current market value of NIS 1.6 billion. Delek Group's share has lost 80% of its value since reaching a peak in 2015.
Of less concern to the heads of Delek Group than its share price, however, is the precipitous collapse of its bond series. Delek Group's debt due for payment to its bondholders and the banks in 2020-2022 amounts to NIS 6.5 billion, of which NIS 6.1 billion is owed to the bondholders.
Delek Group's biggest bond series, Series 31, amounting to NIS 3.1 billion, with a three-year duration, plummeted 20% today, completing a 33% fall in a single week. Yields on the bonds shot up to 21%. The other bonds series (13, 28, 19, 22, 33, and 34) are now being traded at yields of 12-40%, after their prices were down sharply today.
In particular Delek finds itself especially exposed at this time after last year's $1.75 billion purchase of Chevron's North Sea assets.
Published by Globes, Israel business news - en.globes.co.il - on March 8, 2020
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