Kardan NV (KARD)’s 2016 bonds rose, sending the yield to a one-week low, after the Chinese unit of the debt- ridden real estate investor entered talks to sell a stake in a shopping center. Government bonds rose.
The yield on Kardan’s 1.19 billion shekels ($326 million) of 4.45 percent notes maturing February 2016 dropped 59 basis points, or 0.59 percentage points, to 11.586 percent, the lowest since Feb. 12, at 2:17 p.m. in Tel Aviv. The shares fell. The government’s 4.25 percent benchmark bonds due in 2023 yielded 3.98 percent, down four basis points.
Kardan’s Land China unit signed a letter of intent with an international fund for the sale of a 50 percent stake in the Europark Dalian mall for 710 million yuan ($114 million). The company, which is struggling to meet debt commitments for 2014, last month reached an understanding with bondholders on concessions including its dividend distribution and that 50 percent of asset-sale proceeds will be used for debt repayments.
“Kardan has a liquidity problem,” Noam Pincu, an analyst at Psagot Investment House Ltd., said today by phone. “If the sale goes through it will help improve Kardan’s ability to repay debt in 2014 and will win them time to find more financing.”
Kardan, which owes 35 million euros ($46 million) to debt holders this year and 74 million euros in 2014, had 50 million euros in its coffers at the end of September, according to November company presentation. The yield on Kardan’s 2016 bond soared 10.4 percentage points last year and reached a record 23.8 percent on July 5. The yield on the company’s 1.33 billion shekels of 4.9 percent notes due February 2020 fell 65 basis points, the most since Feb. 3, to 10.62 percent.
Standard & Poor’s Maalot yesterday cut Tel Aviv-based Elbit Imaging Ltd. (EMIT)’s rating to Default from ilCC after the real estate investor failed to make payments to bondholders due Feb. 20. The yield on Elbit Imaging’s 751 million shekels of 5 percent bonds due April 2020 rose 22 basis points to 49.96 percent. The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed- rate corporate bonds, was little changed at 283.45.
The Bank of Israel will probably leave the benchmark interest rate unchanged at 1.75 percent on Feb. 25 after four cuts in 2012, according to 10 of 18 economists surveyed by Bloomberg. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, fell for a sixth day, declining three basis points to 1.60 percent.
Israel’s average annual inflation expectation was unchanged at 2.14 percent, according to the two-year break-even rate, the yield difference between the inflation-linked bonds and fixed- rate government debt of similar maturity. The government’s target range is between 1 percent to 3 percent.
The shekel weakened 0.2 percent to 3.6794 a dollar in Tel Aviv. The currency gained 0.7 percent this month, the second- best performer of 31 major currencies according to data compiled by Bloomberg.
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