US offerings in Tel Aviv a bonanza for underwriters

dollars  picture: Thinkstock
dollars picture: Thinkstock

US companies are paying triple the fees paid by Israeli companies for bond issues.

The large fees charged by local underwriters and consultants for bond issues on the Tel Aviv Stock Exchange (TASE) by US real estate companies have attracted great attention in recent years. Full figures have now been disclosed for 2017, when foreign companies resumed their bond issues on a large scale. The figures highlight the goldmine for the local underwriters, who are prospering from a peak period in corporate bond issues fostered by near-zero interest rates.

According to figures from Epsilon Underwriting and Issuing obtained by "Globes," fees paid by issuers of debt on the TASE totaled NIS 164 million in 2017 (as of last week) in less than 30 offerings in which nearly NIS 9 billion was raised - an average fee of nearly NIS 6 million per issue.

This is substantially more than the amounts paid by Israeli companies for bond issues; although the corporate debt raising by foreign companies made up 13% of the TASE bond issues, it accounted for 37% of all the fees paid.

Tel Aviv attractive to the US

The reason for the enormous difference in the fees charged is the attractiveness of TASE debt issues for foreign companies, which would have had to pay much higher interest rates for issues of the same volume in the US. That is why they are willing to pay high fees from the amounts they raise in Israel - issuing debt on the TASE is still better for them than the overseas alternatives for raising debt.

In many cases, the fees charged for these issues (which also include success fees) reach 3% or more of the total amount raised, compared with fee rates of around 1% for bond issues by local companies.

Epsilon Underwriting's figures also show that the fees paid by all the companies that made issues over the past year totaled NIS 440 million paid by 230 companies, reflecting an average fee of NIS 2 million for a TASE issue. Excluding US companies reduces the average figure to NIS 1.5 million per issue. Underwriters' fees in previous years totaled NIS 250-300 million a year.

The largest fee paid by a US real estate company for a TASE bond issue was NIS 22.5 million by Jeff Sutton's Wharton Properties, which paid a 2.5% rate on its NIS 900 million bond issue. Other large fees were over NIS 15 million by Zarasai on a NIS 960 million bond issue, NIS 10 million by All Year on a NIS 580 million debt issue, and NIS 10 million by Waterstone Properties on an issue of just over NIS 400 million.

Published by Globes [online], Israel Business News - www.globes-online.com - on December 14, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

dollars  picture: Thinkstock
dollars picture: Thinkstock
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