IEC raises $500m in New York bond issue

The Israel Electric Corporation's five-year dollar denominated bonds bear an interest rate of 6.7%.

Israel Electric Corporation (IEC) (TASE: ELEC.B22) has raised $500 million in a bond issue in New York. The five-year dollar denominated bonds bear an interest rate of 6.7%, less than the original pricing guidance of 6.875-7%.

Moody's Investors Service reportedly rates the bond Baa3 and Standard & Poor's rates its BB+. The bond will be repaid in a single installment on February 10, 2017.

IEC is trying to raise more than $2 billion in bonds. The utility's debt before today's issue was NIS 63 billion, and the company faces billions of shekels in higher expenditures to generate electricity, because the suspension of natural gas deliveries from Egypt forces it to use more expensive diesel.

IEC raised NIS 4 billion on the Israeli market in 2011, and it will need to raise considerably more this year to meet its financial needs. However, even if it succeeds in raising the capital, its financial situation will continue to deteriorate. IEC had NIS 1.5 billion in cash at the end of September 2011, and it subsequently took a NIS 1 billion loan from Bank Hapoalim (TASE: POLI). The company has to repay NIS 3.7 billion in debts this year, which means that its cash flow deficit is still large.

Published by Globes [online], Israel business news - www.globes-online.com - on February 8, 2012

Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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