Israel Electric Corporation (IEC) (TASE: ELEC.B22) is planning to raise hundreds of millions of dollars in debt, and is considering having the bonds listed for trading on the Tel Aviv Stock Exchange (TASE), in contrast to the previous plan, which was slated for Singapore, according to an internal company document obtained by "Globes" and written before Operation Protective Edge began. The issue is scheduled for next October, as part of IEC's planned issue of $5 billion in global medium term notes. IEC has raised $3.4 billion so far under the plan, leaving $1.6 billion more to be raised overseas. The plan is designed to help IEC meet its large debt payments and recycle its loans.
According to the plan, these bonds will be traded by investment institutions in a continuous trading forum. Barclay's Bank and Citibank will lead the issue. IEC is also likely to include Israeli investment institutions (as the Delek Group Ltd. (TASE: DLEKG) oil and gas exploration partnerships did in the recent huge Tamar Bond issue), local underwriters for this purpose. IEC customarily works with Clal Finance Underwriting and Leader Underwriters, which have regularly won IEC's underwriting tenders in recent years.
The market believes that the application for a TASE listing is due to tax concerns (an exemption from withholding tax for foreign investors). The Singapore Stock Exchange is also not unknown to IEC, which issued $1.4 billion there in bonds to US investment institutions in two issues last year under the GMTN plan, led by foreign underwriters Barclays and Citi. IEC received permission to increase expand its issue by $3 billion.
IEC ended the last quarter with a NIS 347 million loss, continuing its trend of losses and erosion of its equity, which amounted to NIS 14.3 billion at the end of the period. Incidentally, IEC's customers are in effect paying for its interest expenses through the electricity tariff, which is rising.
At the beginning of the month, international rating company Standard and Poor's upgraded IEC's international rating to BBB+, and its local rating to AA, both with a stable outlook.
IEC elected not to respond to the report. Company sources explained to "Globes" that the document was "one of many," claiming the figures contained in it were not precise. "IEC is active from time to time in the domestic and international capital market, and fulfills the regulatory requirements. When a future date for an issue is set, the company will give notification through the accepted channels," the sources added.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2014
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