Fertilizer manufacturer Israel Chemicals (TASE: ICL: NYSE: ICL) is taking advantage of the low global interest rates to refinance most of its huge bank debt. Israel Chemicals today reported that a syndicate of 11 international banks would provide it with a renewed $1.705 billion line of credit.
ICL said that it would pay LIBOR plus 0.7% interest on the first third of the credit line, LIBOR plus 0.8% interest on the second third, and LIBOR plus 0.95% interest on the last third.
The credit agreement also includes an annual 0.21% charge for unused credit. The current LIBOR interest in dollars ranges from 0.27% on a three-month loan to 0.69% on a12-month loan. LIBOR interest in euros is lower, varying from 0.01% to 0.2%. Israel Chemicals says it can take the loan in either dollars or euros.
The new credit agreement enables Israel Chemicals to make early repayment of $1.325 billion in previous loans that it received in two installments in 2011 for five years, and a $125 million loan granted the company last year.
Four financial criteria
Israel Chemicals finished 2014 with a $3.5 billion balance of debt: half consisting of loans from financial institutions and half consisting of bonds issued to the public.
As part of its new loan, Israel Chemicals undertook to meet four different financial criteria. The company is now committed to maintaining at least $2 billion in equity, a minimum EBITDA-to-net interest expenses ratio of 3.5, a debt-to-EBITDA ratio of less than 3.5, and a ratio of its subsidiaries' debt to the group's total assets of less than 10%.
Israel Chemicals said that as of the end of 2014, the company was meeting all of the conditions. Its equity was $3 billion, its EBITDA-to-net interest expenses ratio was 18.2, its debt-to-EBITDA ratio was only 1.76, and the ratio of its subsidiaries' debt to the company's total assets was only 0.8%.
Controlled by Israel Corporation (TASE: ILCO) and managed by CEO Stephan Borgas, Israel Chemicals' profit plummeted 43% to $464 million in 2014, and its revenue was down 2.5% to $6.1 billion.
Operating profit on potash, the company's main profit center, dropped 27% to $536 million, as a result of the fall in potash prices, despite a 6.5% rise in the quantity sold. Israel Chemicals' market cap is NIS 36 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2015
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