Goldman Sachs Group Inc. (NYSE:GS) will lend Israel Electric Corporation (IEC) $1 billion for 20 years. The agreements are due to be signed later this week. Goldman Sachs met senior Ministry of Finance officials, Government Companies Authority acting director Shimon Ben-Hamo, and Ministry of National Infrastructures director general Hezi Kugler yesterday, and held a further meeting with Ministry of Finance director general Yarom Ariav today to hammer out the agreement.
A $1 billion credit line will greatly improve IEC’s credit problems. The company owes NIS 53 billion, some of it long-term debt. The company has struggled to raise capital recently because of uncertainties about its restructuring. The company needs $1 billion a year, but has only raised a few hundred million dollars since January.
The government, as the sole owner of IEC, is fully involved in the loan agreement and its terms. The government must also approve the agreements to prevent a situation in which IEC undertakes commitments that will hinder or even prevent the government from implementing its planned reform of Israel’s electricity market.
The lender will have to ensure an additional source for repayment of the loans if IEC is broken up into several subsidiaries. Guarantees must be formulated to ensure that the government backs the loans, even after the reform, and later when the subsidiaries are floated on the Tel Aviv Stock Exchange (TASE).
A $1 billion loan is probably the largest ever loan granted in Israel. The 20-year loan has a lengthy grace period, however the interest terms are not known. The parties mention “interest commonly granted in the market at this time.” IEC will notify the TASE immediately upon signing the loan.
Published by Globes [online], Israel business news - www.globes.co.il - on October 30, 2007
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