Sources inform ''Globes'' that Israel Electric Corporation (IEC) (TASE: ELEC.B22) plans to raise up to $6 billion in debt overseas, and that it plans to carry out the first part of this plan by raising $1 billion in late May. IEC has already picked Citibank Inc. (NYSE: C) and Barclays Bank plc (LSE: BARC) as the underwriters. Market source believe that IEC will be able to raise the debt at a low interest rate of 6%.
IEC plans to use the proceeds to meet its NIS 11 billion in debt payments and recycling of loans due this year. The decision to raise debt was partly influenced by Standard & Poor's Maalot's pending decision about IEC's credit rating. Three months ago, Maalot notified IEC that it was putting the utility on its watch list because of IEC cash flow shortfall. IEC's international debt rating of BB+ is teetering on junk bond status.
IEC's new plan to raise debt abroad supersedes its GMTN plan, under which it raised $2 billion in 2008-12. IEC's raising debt abroad has been sharply criticized because of the high interest rate it was forced to promise the bondholders. Most of the criticism targeted the bond issue carried out in January 2009, at the height of the global financial crisis a few months after the collapse of Lehman Brothers. IEC agreed to pay an interest rate of 9.5%, and in May 2008, it promised an interest rate of 7.25% on the $500 million raised.
Today, however, IEC is optimistic that it can raise debt abroad at low interest rates because of the low, 6.5% interest rate secured in the previous bond issue a year ago, and the 2% interest rate that the Israeli government secured on the $1 billion in government bonds issued last month.
Published by Globes [online], Israel business news - www.globes-online.com - on February 21, 2013
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