Private company Alon Israel Oil Company Ltd. (Alon Group), owned by Adv. Shraga Biran, David Wiessman, and the kibbutzim, is considering becoming a public company and holding an IPO as part of a second debt settlement amounting to NIS 1.9 billion. Sources inform "Globes" that the group, managed by CEO Avigdor Kaplan, is currently in the process of preparing a prospectus for a NIS 150-200 million share offering on the Tel Aviv Stock Exchange (TASE). The group plans to rescheduling its bond payments through two new bond series. Discount Capital Markets chairman Tzahi Sultan is leading the offering.
Alon Group said in response, "The company is in a dialogue with representatives of the bondholders and the trustee. Among other things, a proposed offering is being discussed with them. At this point, the company has nothing to add in this matter."
The offering was recently proposed to representatives of the Alon Group bondholders, who have yet to respond to it. One bondholder told "Globes" today, "It might not be practical." Alon Group has experienced a sweeping downward financial spiral at almost every level of its holdings pyramid in recent years (Alon Holdings Blue Square - Israel Ltd. (NYSE: BSI; TASE: BSI), the Mega retail chain), and has itself required a NIS 2.2 billion debt settlement.
As far as is known, Alon Group and Discount Capital Markets plan to issue shares to the public this year, probably in September, according to the group's results for the first quarter of 2016. At this point, it is not yet the company value for the offering. Under the plan, if and when the offering is completed, the group will use the money, together with the NIS 350 million in cash it currently has, to immediately repay a third of its bonds, and the rest of the debt will be rescheduled.
The company will then be left with a NIS 1.25 billion debt to its bondholders, which will be divided into two new series. The first, amounting to NIS 600-650 million, will consist of a short-term series according to the current repayment schedule for the company's bonds. The second, with a similar amount, will be a long-term bond series to be repaid in 2025-2029.
According to the plan that the company is currently working on, the new long-term series will be backed by securities based on the group's shares in Alon Natural Gas Exploration Ltd. (TASE: ALGS), one of the shareholders in the Tamar gas reservoir. Holders of the new short-term bond series will receive preference for the group's assets, which will be sold in the future, because every sale of assets by the group will be deducted from the principal of the short-term bond series.
"An offering and debt rescheduling is a win-win situation"
The debt settlement was presented to representatives of the bondholders by Discount Capital Markets, which explained today, "We have here a company with a huge debt, very good assets, and a strong cash flow from the companies it owns. The process of issuing shares and rescheduling debt will be a win-win situation. It will give the company a few years to improve the state of its holdings - mainly holdings in the US, whose value is currently at a low point."
As Alon Group and its advisers see it, the company currently has a problem with its debt in terms of net asset value (NAV), which currently stands at minus NIS 100-200 million according to the market value. The company believes, however, that Alon Group's financial value is good, based on the strong cash flow of the companies in the group about NIS 80-100 million a year.
Sources close to the company assert that Alon Gas generates NIS 50-60 million a year in cash flow for its parent company.
In addition, Alon Group has a NIS 10-15 million cash flow from Highway 6 franchise holder Derech Eretz Highways. Alon Group also owns shares in Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) that are available for sale.
Alon Group is owned by Bielsol (52%), controlled by Shraga Biran with an 80% stake, with the remaining 20% owned by David Wiessman, the deposed manager of the group, and the kibbutzim (48%). The group still controls Alon Holdings Blue Square Israel (the controlling shareholder in the Mega retail food chain, currently managed by a trustee; Dor Alon filling stations; Blue Square Real Estate Ltd. (TASE: BLSR); and the Naaman chain of household utensils stores), Alon Gas (the owner of 4% of the Tamar gas reservoir), and 9.5% of refining company Delek US Holdings Inc. (NYSE:DK).
Alon Group's new plan depends on completion of the sale of its 72.7% controlling interest in Alon Blue Square Israel to Moti Ben-Moshe. Alon Blue Square Israel finished 2015 with a going concern warning and a huge NIS 1.27 billion loss for the year. At the end of 2015, Alon Blue Square had NIS 115 million in cash left, which has since become substantially less, because the holding company is still paying interest to the banks and the bondholders, and must pay suppliers for coupons issued in the past being cashed in by the public.
Under the agreement signed by the parties, Ben-Moshe is to pay Alon Group NIS 115 million for the controlling interest, and to sign a debt arrangement with Alon Blue Square Israel's creditors, including an injection of NIS 900 million directly into the company for payments to its creditors. Completion of this deal has been delayed for many weeks, following lawsuits amounting to hundreds of millions of shekels filed by the Mega trustees against Alon Blue Square Israel, and their refusal to sell the chain to Ben-Moshe for NIS 200 million and cancel all the lawsuits.
Before the Passover holiday, the Lod-Central District Court gave the parties two weeks to try to reach agreement, but while this period is due to expire tomorrow, as of now, the parties have reported no agreements between them. Mega trustees petitioned the court at the beginning of the week to extend the stay of proceedings for the chain until the end of July.
Published by Globes [online], Israel business news - www.globes-online.com - on May 4, 2016
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