IDB Development Corporation Ltd. (TASE:IDBD), controlled by Eduardo Elsztain, is raising NIS 200-300 million in a new bond series - Series 14. The bonds, which will be repaid on December 30, 2022, will be secured with a lien on IDB's shares in its Discount Investment Corporation (TASE: DISI) subsidiary. The value of the encumbered shares will be 33% greater than the amount of the debt.
IDB Development currently holds 106.78 million Discount Investment shares, 71% of that company's share capital, with a market value of NIS 1.5 billion. Ostensibly, IDB Development could raise NIS 1 billion secured by the shares, but 46.2 million Discount Investment shares are encumbered in favor of holders of IDB Development's Series 12 bonds, so the maximum size of the series is initially only NIS 600 million. This situation, however, could change if IDB Developments seeks early redemption of its Series 12 bonds, scheduled for repayment in November 2019.
In its pre-issue presentation, IDB Development emphasizes that the deed of trust for the Series 14 bonds will be adapted to the solution it adopted for the requirements of the Promotion of Competition and Reduction of Concentration Law, in which its holdings in Discount Investments will be transferred to a different company owned by Elsztain. The Discount Investment shares will continue to be encumbered in favor of the holders of the Series 14 bonds, even after those shares are transferred from IDB Development to another company.
This agreement does not appear in the deed of trust for the Series 12 bonds, and for that reason, holders of this bond series are likely to oppose the transfer of Discount Investment shares to another company. In order to avoid the need to obtain their approval for the transfer, the management of IDB Development is likely to consider early repayment of the Series 12 bonds, which amount to NIS 383.5 million par value.
Published by Globes [online], Israel Business News - www.globes-online.com - on July 10, 2017
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