Habas H.Z. Investments (1960) bonds rallied, sending the yield down the most on record, after Israeli real estate investor Aspen Group Ltd. offered to buy shares of the company and give bondholders stock.
The yield on the 180 million shekels ($49 million) of 5 percent notes due August 2018 slumped 601 basis points, or 6.01 percentage points, the most on record, to 46.95 percent at the close in Tel Aviv. Shares of the Tel Aviv-based company, which plunged 79 percent in the past 12 months, gained 9.3 percent to 1.072 shekels. Israel’s 4.25 percent benchmark 2023 government bonds yielded 4.03 percent, up two basis points.
Aspen proposed buying all Habas shares and offering debt holders stock in the company, it said in a statement to the Tel Aviv bourse today. Habas, which also develops real estate, said this month there are “significant doubts” it will manage to make debt payments in May and August.
“If Aspen’s offer goes through this would result in a more liquid owner,” Jaap Kuin, an analyst at ING Bank NV in Amsterdam, said by phone. “A more cash-rich owner may also help strengthen NSI’s balance sheet.”
Habas attributed its repayment doubts to the drop in shares of Hoorn Netherlands-based Nieuwe Steen Investments NV, in which it owns a 20.5 percent stake. That stock, down 44 percent in the past year, rose 3.2 percent today. Nieuwe reported a third-quarter loss of 30.1 million euros ($39 million) as a result of property revaluations and portfolio writedowns.
Aspen, which has free cash flow of 170 million shekels, is also offering Habas a credit line of 5 million euros, according to today’s statement. The Habas family controls 40 percent of Habas, while 23 percent are owned by billionaire Ofer family.
The Tel-Bond 40 Index of corporate bonds rose for a second day, advancing 0.1 percent to 284.15. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, increased less than one basis point to 1.60 percent.
The two-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government notes of similar maturity, rose eight basis points to 265, implying an average annual inflation rate of 2.65 percent over the period.
The shekel strengthened 0.4 percent to 3.6731 a dollar at 4:47 p.m. in Tel Aviv, boosting the monthly appreciation to 1.1 percent, the third-best performer among 31 major currencies tracked by Bloomberg.