Shikun & Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison, is to restructure its debt. The company, which has been suffering from the worsening political situation in Nigeria, will try to replace short-term debt due for repayment in fourteen days' time.
Two weeks ago, S&P Maalot cut Shikun & Binui's credit rating, chiefly because of the fear of continued deterioration in the situation in Nigeria, where the company derives a substantial part of its revenue. It is difficult to understand from Shikun & Binui's financial statements the exact proportion of its revenue and profit that comes from its activity in Nigeria, and how its cash is managed, but capital market sources said today that the company's business in Israel was sufficient to service its debt, and that the debt restructuring was an obvious and positive move, as long as a suitable premium was paid for extending the debt's duration.
Shikun & Binui is very active in infrastructure projects in Nigeria, where the Nigerian government is its main customer. Unrest in that country has disrupted oil production, the main source of state revenues, which had anyway been affected by the drop in oil prices.
Shikun & Binui will seek to replace NIS 884 million, par value, in series 5 bonds traded at around NIS 1 billion and offering a gross yield of 1.86%, with a duration of 3.1 years with series 8 bonds, on which the yield is 3.8% and which have a duration of seven years.
"The story at Shikun & Binui is not the debt but the stock," a prominent capital market player told "Globes" this morning, "With a suitable premium, swapping short-term debt for long-term debt looks like a good move, but problems with the company's main customer and lack of clarity in the financial statements will have an adverse effect on the company in the short and medium terms."
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2016
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