IDB Bond Yield Drops Most in 2 Weeks on HSBC Office Tower Offer

IDB Holding Corp. (IDBH) bonds rose, sending the yield down the most in almost two weeks after a unit of the debt-strapped company’s investment arm got a $750 million offer to sell New York’s HSBC Tower.

IDB’s 5.1 percent bonds due December 2020 soared 6.5 percent to 23.31 agorot to the shekel, lowering the yield to 55.54 percent, the first decline in a week, at the close in Tel Aviv. The company’s shares rose 4.8 percent as the benchmark TA-25 index gained 0.8 percent. The nation’s benchmark bonds fell, with the yield on the 5.5 percent Mimshal Shiklit notes due in January 2022 increasing three basis points to 3.79 percent.

Property & Building Ltd. (PTBL), which is 79.2 percent owned by IDB’s Discount Investment Corp. (DISI), said today that no decision on the offer for the building has been made. The value of the Fifth Avenue building was raised to $580 million on March 31, according to the company’s third-quarter results. IDB, which is struggling to meet payments on about 2 billion shekels ($533 million) in debt, has been in talks with debtholders to avert insolvency proceedings. Property & Building’s shares surged 18 percent, the most since Nov. 2008, to 181.60 shekels.

“This is a very attractive offer for the company which would also help support the needs of the group,” said Shay Lipman, an analyst at I.B.I.-Israel Brokerage in Tel Aviv. “The company would make a profit from the sale and have free cash flow for dividends.”

Tender Tomorrow

Property & Building Corp. in June agreed to borrow $400 million for a 10-year period from a foreign institution to refinance its debt on the tower. The yield on Property & Building’s 5 percent bond due November 2017, fell 14 basis points, the most since Nov. 13, to 3.797 percent. The company will tomorrow start the institutional stage of a tender for two new series of bonds. Moody’s Midroog rated as much as 500 million shekels of its debt A1 with a negative outlook.

The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, declined for a sixth day, retreating 0.1 percent to 279.33. First International Bank of Israel Ltd. today accepted 341 million shekels in instutional commitments in a tender for deferred notes. Demand for the notes totaled 914 million shekels.

The two-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government debt of similar maturity, advanced six basis points to 212,implying an annual average rate of 2.12 percent. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, rose one basis point to 1.74 percent.

The shekel strengthened 0.3 percent to 3.7484 a dollar at 4:43 p.m., boosting this month’s advance to 1.8 percent.

To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net

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