The yield on IDB’s 2.12 billion shekels ($584 million) of 4.5 percent notes maturing June 2018 dropped 216 basis points, or 2.16 percentage point, the most since Jan. 1, to 25.36 percent, at 1:53 p.m., in Tel Aviv. Shares (DISI) of its Discount Investment Corp. unit rose for the first time in four days.
IDB holders, including York Capital Management LP, filed a plan to convert 55 percent of the company’s 3.8 billion shekels in debt to equity, while 45 percent would be exchanged for new bonds. The company, which has been trying to sell Clal Insurance Enterprises Holdings Ltd. (CLIS), owes bondholders and banks a total of 6 billion shekels, according to yesterday’s court filing.
“The plan paves the way for bondholders to take over the company and provides the ability to sell its assets,” Raz Mor, a corporate debt analyst at DS Securities & Investments Ltd., said today by phone from Tel Aviv. “The proposal suggests that holders see value in the company’s assets and are positioning themselves to benefit from potential upside.”
IDB reiterated that it has 1.1 billion shekels of easy-to- access assets to meet its payments until the first quarter of 2014 and called the plan an attempt to take control of the assets of the company, according to an e-mailed statement yesterday.
Standard & Poor’s Maalot cut the company’s rating by three grades to ilB, five levels below investment grade, citing “weak” funding and unsustainable high leverage. The company may fall 1 billion shekels short of cash to cover debt and costs in 2014, S&P said in January. The yield on IDB Development’s 2018 notes soared 13.5 percentage points last year.
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