The continuing positive mood on the stock markets in Israel and worldwide is also benefiting the local debt market. In recent weeks, a wave of bond issues has been sweeping the Tel Aviv Stock Exchange (TASE), enabling public companies to reschedule billions of shekels in debt at extremely low interest rates.
Real estate companies, whose financing expenses make up a substantial part of their activity, have especially benefited from this situation. One such company, which completed an initial debt issue on the TASE this week, is Elad Group, Yitzhak Tshuva's private real estate group, which raised NIS 500 million in a private bond placement to investment institutions.
Elad Group handles Tshuva's real estate business in North America. Among other things, it holds fully ownership of its Elad Canada subsidiary, whose bonds have been traded on the TASE since August 2018. Elad Group offered its new private bonds for 99% of their nominal value (i.e. at a 1% discount), with an average duration of 3.14 years.
Demand in the auction held by Elad Group for investment institutions exceeded NIS 600 million, of which the company supplied NIS 500 million. The company will use the proceeds mainly for refinancing, extending the average duration of its financial liabilities, and lowering its interest costs.
Elad Group's bonds were issued at a 5.65% annual interest rate. The bonds are secured with a lien on some of the shares in the group's Elad Canada subsidiary. These shares will become marketable if Elad Canada decides this year to also carry out an IPO on the TASE.
Big raises NIS 600 million
Other real estate companies held large bond issues on the TASE this week. For example, Big Shopping Centers (2004) Ltd. (TASE:BIG) completed a NIS 600 million issue of Series 15 bonds, after demand in the preliminary auction reached NIS 1.185 billion. Big's new bonds were rated Aa3 by Midroog, and were issued with an average duration of 7.84 years. The bonds, which are linked to the Consumer Price Index, were issued at an annual interest rate of only 1.17%, due to the strong demand from investors.
Published by Globes, Israel business news - en.globes.co.il - on January 15, 2020
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