Delek Royalties raises NIS 130m more but cuts valuation 15%

Yitzhak Tshuva  photo: Gil Yohanan

Delek Energy can now sell the 4.9% super royalties from Tamar to which it is entitled to Delek Royalties for $170 million.

Trading on the TASE (Tel Aviv Stock Exchange) in Delek Royalties' shares is slated to begin next week, after the company raised NIS 130 million ($36 million) this week in the stocks part of its offering at the minimum price of NIS 10.87 per share.

Delek Royalties raised $113 million (NIS 404 million) in bonds in the first part of its offering, bringing the total raised to NIS 530 million ($150 million). Delek Group Ltd. (TASE: DLEKG), Delek Royalties' controlling shareholder (through Delek Energy Systems Ltd. (TASE: DLEN)), has thereby taken another step towards divesting itself of the Tamar natural gas reservoir. Delek Energy, however, still retains 40% of the Delek Royalties' capital, because demand for the latter's share offering was rather poor and the company had to cut 15% off Delek Royalties' value in order to complete its offering.

Super royalties on revenue from the Tamar reservoir

Delek Royalties is a special purpose vehicle founded by Delek Group, controlled by Yitzhak Tshuva, for the purpose of receiving the super royalties from the Tamar reservoir to which Delek Energy is entitled. The interest on the 4.7-year dollar bonds was set at 5.48%. Midroog rated the bonds Aa3 with a stable outlook.

Th super royalties from Tamar to which Delek Group was entitled were 1.5% as of the end of 2017, then jumped to 6.5% in January 2018, after the investment in the reservoir was made back. With the completion of the financing round, Delek Energy can now sell the 4.9% super royalties from Tamar to which it is entitled to Delek Royalties for $170 million. Delek Group, which holds 88.2% of Delek Energy's shares, will retail the right to 1.6% in super royalties on revenue from Tamar.

Delek Group took a similar measure in July 2017 when Tamar Petroleum, a special purpose vehicle that it founded, raised $650 million (NIS 2.4 billion) in a bond issue, followed by $200 million more in a share offering, for the purpose of purchasing 9.25% of the rights in Tamar. Tamar Petroleum's share price has dropped by nearly 20% since the offering, among other things because of concern about a smaller cash flow from Tamar in the coming years. Tamar Petroleum's market cap is NIS 1.5 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on June 7, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Yitzhak Tshuva  photo: Gil Yohanan
Yitzhak Tshuva photo: Gil Yohanan
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