Israel Corp promises no new investments

Idan Ofer
Idan Ofer

Israel Corporation will soon begin a roadshow for a NIS 750 million bond issue.

Idan Ofer is planning a NIS 750 million bond issue for Israel Corporation (TASE: ILCO). The issue will include two new bond series: one denominated in shekels and one in dollars. Both series will have a duration of 5.5 years. Israel Corporation will begin a roadshow in the coming days, with the aim of taking advantage of the current offerings boom and completing the issue this month.

Israel Corporation is promising investors not to use the money for new investments, given its unsuccessful investments in Chinese auto manufacturer Qoros (actually one of Kenon Holdings Ltd.'s (TASE:KEN: NYSE: KEN-WI) investments, but which has severely damaged the group's reputation) and Better Place. It will, however, add to the investments it has already made. The company is also undertaking not to distribute dividends, charge management fees, or buy back its shares unless three conditions are simultaneously fulfilled:

1. Net liabilities in 2016 do not exceed $1.6 billion.

2. Net liabilities do not exceed $1.4 billion starting in 2017.

3. The ratio of net liabilities to assets does not exceed 50%. The current ratio is 43%.

Standard & Poor's Maalot Ltd. has reaffirmed Israel Corporation's A plus rating with a negative outlook, given the 14% drop in the value of its investment portfolio.

Maalot writes that there is a risk of deterioration in the company's debt coverage ratio if Israel Chemicals' (TASE: ICL: NYSE: ICL) operational results decline. It adds that the negative rating outlook reflects the risk resulting from volatility in the markets and the fall in Israel Chemicals' value. Maalot writes, "The LTV ratio now deviates from what we defined as corresponding to the current rating - in other words, it is lower than 40%."

Bonds similar to those Israel Corporation plans to issue are currently traded in a range of 200-300 points above the corresponding government bonds, while recent large issues were expanded beyond the initial rating, so it can be assumed that in this case also, if demand is strong enough, the company is likely to increase the issue above NIS 750 million.

Published by Globes [online], Israel business news - www.globes-online.com - on May 5, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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