Azorim Bond Yield Falls to Record After Demand Doubles at Sale

Feb. 19 (Bloomberg) -- Azorim-Investment Development & Construction Co.’s bonds gained, lowering the yield to a record, after demand from institutions at a sale of the Israeli real estate company’s debt more than doubled. Government bonds rose.

The yield on Azorim’s 350 million-shekel ($95 million) 5.5 percent notes due in December 2017 fell 29 basis points, or 0.29 percentage point, to an all-time low of 2.3 percent at the close in Tel Aviv. The company’s shares rose for the first time since Feb. 11, adding 2 percent. The 4.25 percent benchmark government bonds due March 2023 yielded 4.04 percent, down one basis point.

The Tel Aviv-based developer received 490 million shekels of institutional bids for a 205 million-shekel debt tender, it said in a statement today. The yield on the company’s bonds has fallen 82 basis points since Moody’s Midroog raised Azorim’s credit rating on Feb. 3 by one level to A3, citing its steps to boost equity and funding to meet 300 million shekels of debt commitments this year. The company last month raised 120 million shekels via a rights offering.

“The company’s recent efforts to improve its financial situation, including the rights offering, contributed to the high demand for its debt in the tender,” said Adar Etzioni, head of research at Migdal Capital Markets Ltd. in Tel Aviv. “Investors are confident that it will be able to meet its commitments.”

Rate Meeting

Azorim expects to raise 45 million shekels in the public stage of the debt tender, according to the e-mailed statement today. The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, increased 0.1 percent to 283.29, the highest since Feb. 11.

The Bank of Israel, which is due to hold its next interest rate-setting meeting on Feb. 25, last month left the benchmark rate unchanged at the lowest level in more than two years. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, declined one basis point to 1.66 percent, the lowest since Jan. 1.

Analysts, including Yshai Shilo of I.B.I.-Israel Brokerage & Investments Ltd., said this week they expected another rate cut as early as this month or March to spur the economy after annual inflation decelerated to 1.5 percent in January from 1.6 percent a month earlier.

Israeli consumer prices are expected to rise 1.9 percent in the next 12 months, according to a survey of economists released by the Bank of Israel today. Inflation may average 2.13 percent in the next two years, according to the two-year break-even rate. The rate, which reflects the yield difference between the inflation-linked bonds and similar-maturity fixed-rate government debt, retreated two basis points to 213.

The shekel strengthened 0.1 percent to 3.6818 a dollar at 4:51 p.m. in Tel Aviv, bringing this month’s appreciation to 0.7 percent, the fourth-best performer among an expanded list of 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