IDB Bond Yield Drops as $75 Million Investment Option Extended

IDB Holding Corp. (IDBH)’s 2020 yield fell the most in a month after the company’s biggest shareholder agreed with an Argentinian businessman to extend the terms of a $75 million investment agreement.

The yield on IDB’s 1.07 billion shekels ($295 million) of 5.1 percent bonds plunged 103 basis points, or 1.03 percentage points, the most since March 12, to 61.04 percent, at 2:54 p.m. in Tel Aviv. The shares rose for a third day. The yield on Israel’s 4.25 percent benchmark bonds due March 2023 was unchanged at 3.8 percent.

Ganden Holdings Ltd., which owns 47 percent of IDB Holding, and Eduardo Elsztain agreed to extend until April 28 an option for Elsztain to buy more shares in Ganden, according to a filing to the Tel Aviv bourse today. Elsztain, who last year bought 10 percent of Ganden for $25 million, hasn’t decided whether to boost that to $100 million as IDB Holding is embroiled in debt- settlement talks with bondholders.

The extension is “positive news”, Avihay Hermon, a trader at Tel Aviv-based Israel Discount Bank Ltd. (DSCT), said by phone. The Israeli capital markets regulator has approved any additional investment by Elsztain into Ganden, IDB said today.

IDB Holding, which is seeking funds to meet payments on about 2.06 billion shekels of debt, proposed last month to transfer 15 percent of its shares to bondholders, as well as a 500 million-shekel cash injection. The debt settlement hasn’t been approved yet, the company said in a statement today. Dalet (DLT) bondholders voted against taking further legal steps against the company, it said.

Debt Commitments

“The company still has to come to an agreement with bondholders which will include a haircut,” Hermon said. “Looking ahead it’s not clear how the company will be able to meet its commitments as it struggles to sell assets.”

The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, was little changed at 286.19.

Israel’s one-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government debt of similar maturity, rose nine basis points to 256 basis points. That implies an average annual inflation rate of 2.55 percent in the period, within the government’s 1 percent to 3 percent target range.

One-year interest-rate swaps, an indicator of investor expectations for rates over the period, were unchanged at 1.63 percent. The Bank of Israel last month kept interest rates at 1.75 percent.

The shekel strengthened 0.4 percent to 3.6256 a dollar, taking this year’s appreciation to 3 percent this year, the fourth-best performer among 31 major currencies tracked by Bloomberg.

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

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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