Discount Investment Corp. (DISI) jumped to the highest in more than 14 months and its 2025 bonds rose as a unit of the Israeli investment company eyes the sale of its shares in Credit Suisse Group AG. (CSGN)
Discount shares rose 8.3 percent to 17.29 shekels, the highest since May 2012, at the close in Tel Aviv. Koor Industries Ltd. (KOR), in which Discount owns a 67 percent stake, advanced 5.9 percent to 59.93 shekels, the highest since April 2012. The yield on Discount’s 1.25 billion shekels ($343 million) of 4.95 percent notes due December 2025 fell four basis points, or 0.04 percentage points, to 7.70 percent, the lowest since July 14.
Koor, which has a 2 percent stake in Credit Suisse, according to data compiled by Bloomberg, said today its board has approved an occasional share sale. The decision follows a recovery in the Swiss shares over the past year and the possible merger of Koor with Discount. Credit Suisse shares advanced 78 percent in the past 12 months after falling 41 percent in 2011.
“It makes sense for Koor to start selling its stake as Credit Suisse shares have reached comfortable levels and as the company is planning to merge with Discount,” said Sharon Naveh, institutional and international sales at Migdal Capital Markets Ltd., in Tel Aviv. “It also shows investors that the company will realize assets if necessary as its parent companies are embroiled in debt-restructuring talks.”
Discount earlier this month raised 224 million shekels from a bond sale to improve its cash position as controlling holder IDB Development Corp. is mired in debt-restructuring talks. Moody’s Midroog last month cut the rating on Discount’s debt to Baa2 from Baa1, citing “weak liquidity.”
The company had 130 million shekels in available cash on May 26, according to Moody’s. The report also said Discount is expected to fall 800 million shekels short of its obligations through the end of 2014.
Bondholders of both IDB Development, which holds a 74 percent stake in Discount, and IDB Holding Corp. this month proposed a debt-to-equity swap, a move that increased the possibility that IDB Chairman Nochi Dankner may be ousted.
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