Scailex Corp. bonds slumped, lifting the yield to the highest in more than four months on expectations the debt-ridden Israeli company won’t be able to meet commitments in the coming two years.
The yield on the 281 million shekels ($77 million) of 5.1 percent notes due 2015 rallied 412 basis points, or 4.12 percentage points, to 18.58 percent, the highest since Nov. 28, at the close in Tel Aviv. The shares of the Herzliya Pituach-based company tumbled 20 percent. The yield on the 4.25 percent benchmark government bonds due March 2023 dropped three basis points to 4 percent, taking the weekly decline to 5 basis points.
Scailex, controlled by Israeli entrepreneur Ilan Ben Dov via Suny Electronics Ltd., has “significant doubts” it will be able to continue operations and meet commitments in the next two years, according to a filing with the Tel-Aviv Stock Exchange. The company this year sold 30.73 percent of its 44.54 percent stake in Partner Communications Co., Israel’s second-biggest mobile provider, to help service its debt.
“There’s great uncertainty over how the company will be able to get financing to meet its debt payments,” said Sabina Podval, an analyst at Leader & Co. Investment House Ltd. in Tel Aviv. “Scailex is unlikely to get dividend payments from Partner in the near future, one of the company’s main sources of financing.”
Scailex is now asking to talk to bondholders about a payment of 62 million shekels due at the end of this month, it said in the statement to the Tel Aviv bourse.
Partner, which has seen sales drop as new operators cut prices to lure customers, last year canceled its dividend policy and said it will assess it from “time to time.” Standard & Poor’s Maalot said in October “there is a risk” that Scailex won’t meet its near-term debt commitments, reiterating its ilCC rating, the second-lowest junk rating. Scailex is expected to depend on dividends from Partner in order to serve its debt, it said.
The Tel-Bond 40 Index of corporate bonds retreated for the first time in three days, declining 0.1 percent to 284. The two-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government notes of similar maturity, fell five basis points to 260, implying an average annual inflation rate of 2.60 percent over the period.
The Bank of Israel is expected to hold interest rates at 1.75 percent at its March 24 meeting, according to 13 analysts in a Bloomberg survey. Five expect a 25 basis-point cut. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, fell less than one basis point to 1.60 percent.
The shekel gained 0.3 percent to 3.6671 a dollar at 4:43 p.m. in Tel Aviv, extending its monthly increase to 1.3 percent, according to data compiled by Bloomberg.