IDB Holding Corp.’s 2020 bonds jumped, pushing the yield down the most in almost five months, after Argentine businessman Eduardo Elsztain agreed to inject $57 million into the debt-strapped company.
The yield on IDB’s 1.07 billion shekels ($297 million) of 5.1 percent bonds dropped 601 basis points, or 6.01 percentage points, the biggest decline since December 9, to 68.81 percent, at the close in Tel Aviv. The shares soared the most since March 12.
Elsztain’s investment is also investing $18 million in parent company Ganden Holdings Ltd. giving him joint control of both companies along with Israeli businessman Nochi Dankner, according to a company statement on April 26. The Buenos Aires-based businessman is expected to arrive in Israel this week to advance the deal as IDB Holding, which is seeking funds to meet payments on about 2.06 billion shekels in debt, is embroiled in debt-settlement talks with bondholders.
“IDB is winning some time and Elsztain’s commitment gives some support,” said Oren Ossad, a trader at Excellence Nessuah Investment House Ltd., in Ramat Gan, Israel. “At the same time the investment is only a drop in the ocean.”
The agreement with Elsztain comes after Bank Leumi Le-Israel Ltd. last week backed out of a debt arrangement with Ganden. Elsztain last year bought 10 percent of Ganden for $25 million. IDB Holding in March proposed a debt arrangement to transfer 15 percent of its shares to bondholders, as well as a 500 million-shekel cash injection.
Meanwhile bondholders of the holding company’s IDB Development Corp., including York Capital Management LP, are proposing a recovery plan to convert 55 percent of the unit’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., owes 6 billion shekels to bondholders and banks.
IDB Holding shares jumped 11 percent to 9.32 shekels in triple the three-month average daily volume.
The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, increased for a second day, advancing 0.2 percent to 288.27.