Yeinot Bitan's lifeline feared fraying

Nahum Bitan

It is not clear whether the supermarket chain's finance deal with Klirmark Capital will go ahead, and suppliers are becoming anxious.

Two and half weeks have gone by since supermarket group Yeinot Bitan announced its huge deal with local investment firm Klirmark Capital, in what seemed at the time like a solution freeing owner Nahum Bitan from the onus of dealing with the financial challenge that threatened him. Meanwhile, more and more questions are being asked in the market, and pressure is growing on the part of suppliers to the retail chain because of arrears in payments. As though that were not enough, "Globes" has learned that the group's designated CFO has decided to forego the appointment.

According to the announcement of the deal between Klirmark and Yeinot Bitan, published on January 30, due diligence examinations and the signing of the deal are supposed to take place by the end of this month. Sources familiar with the details, however, say that it looks as though the deal has hit a snag. It is not yet clear whether Klirmark will complete the deal, and if so, on what basis.

The non-binding memorandum of understandings states that Klirmark will inject NIS 500 million into the chain as a loan secured on the chain's entire assets, and that the loan will bear annual interest of 6-7%. It also mentions that part of the loan will be convertible into shares. Now, there is a question mark over completion of the deal. According to the same sources, the due diligence examination has turned up some unpleasant surprises for Klirmark.

The possibility arises that because of the due diligence findings, Klirmark might withdraw from its original plan, either replacing it with new terms, or, in an extreme scenario, cancelling the deal altogether. Another possibility being canvassed is that additional financiers will be brought in.

Meanwhile, Yeinot Bitan has sustained a further blow. "Globes" has learned that David Saban, who was spoken of as the designated replacement for outgoing Yeinot Bitan CFO Eyal Weinberg, has changed his mind and withdrawn from the appointment.

Earlier this month, "Globes" reported that Bank Leumi (TASE: LUMI) investment arm Leumi Partners was in talks with Yeinot Bitan about possible investment, and it seems that there are those who are hoping that this possibility will be revived. Leumi Partners stated to "Globes": "As a matter of policy, we do not comment on transactions that we are examining or not examining," while Yeinot Bitan stated: "To the best of our understanding, there is considerable interest on the part of additional players, among them financial institutions. We are proceeding according to the timetable set in advance with Klirmark."

Meanwhile, it seems that Yeinot Bitan's suppliers are losing patience. "Globes" has talked to medium-size and small food and toiletries suppliers who say that they are no longer able to sustain delays in payments. The MOU with Klirmark temporarily reassured the suppliers that they would shortly receive payments due to them, but the fears have now returned with greater intensity. The smaller suppliers also fear that the finance from Klirmark, if it materializes, will not be enough to save the retail group. Payment of the NIS 110 million debt owed to the trustees of the Mega group, which Yeinot Bitan acquired in 2016, payment of bank debt amounting to NIS 200 million, as well as debts to suppliers estimated at another NIS 150 million, will not leave the group with enough cash to make the investments required in its stores and systems. Yeinot Bitan is shortly due to complete the sale of stores for NIS 180 million, but this will cut its sales turnover by some NIS 600 million. Sources close to the company say that just a minimal renovation of its stores will require an investment by Yeinot Bitan of about NIS 100 million.

Yeinot Bitan stated in response: "We are aware of the growing interest in the deal with Klirmark Capital and we understand it. The deal is proceeding according to the timetable agreed in advance between the parties. There is no need for speculation on the structure of the deal or on alternatives to it. We are working energetically to finish the due diligence examination."

Published by Globes, Israel business news - en.globes.co.il - on February 17, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

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