Alony Hetz 2023 Bonds Drop Most on Record Ahead of Debt Offering

Alony Hetz Properties & Investments Ltd. bonds dropped the most on record as investors trimmed holdings in the debt ahead of a note sale to institutions today.

The yield on the real estate company’s 4.45 percent bond due February 2023, the most-traded corporate note today in Tel Aviv, soared 19 basis points, or 0.19 percentage points, headed for the biggest rally since the notes started trading in February, to 3.47 percent at the close in Tel Aviv. The company’s shares gained for the first time since Jan. 2. The yield on Israel’s 5.5 percent benchmark government bonds due January 2022 was little changed at 3.77 percent. The rate rose 16 basis points so far this month.

Alony Hetz, the country’s fourth-largest real estate company by assets, seeks to raise as much as 500 million shekels ($134 million) from a sale of the 10-year notes with the institutional stage starting today, according to Leumi Partners Underwriters Ltd. The company last month signed a memorandum of understanding with JP Morgan for a $300 million investment in Washington’s Carr Properties.

“The offering comes at a good time as the company is in the process of making larger investments,” Noam Pincu, a Tel Aviv-based analyst with Psagot Investment House Ltd., said by phone. “In recent months we have seen real estate companies raising debt at good conditions, while also demand is high as interest rates are low.”

Investor Demand

The bonds in the tender are priced at a minimum 1,134 shekels per unit. Each unit consists of 1,000 shekels principal amount of notes. Moody’s Midroog assigned an A1 rating on the debt, the fifth-highest investment grade. Industrial Buildings Corp. is expected to sell debt to institutions in coming days. Gazit-Globe Ltd., Israel’s largest real estate company, last month doubled to 1 billion shekels the size of a bond sale to meet investor demand.

The Bank of Israel last month cut interest rates for a fourth time in 2012 to 1.75 percent after inflation decelerated to 1.4 percent in November, the slowest since July. The bank’s rate cut may help extend the recovery in corporate debt sales into this year, Standard & Poor’s Maalot said Dec. 26. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, fell less than one basis point to 1.73 percent.

The Finance Ministry sold a combined 1.3 billion shekels of bonds at an auction today, ministry data posted on Bloomberg show. Investors sought 5.2 times the 350 million shekels of 4.25 percent bonds due March 2023 on sale compared with 3.2 times at the previous sale on Jan. 7. The yield on the 2023 notes retreated for the first time in three days, falling one basis point to 4.02 percent.

The two-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government notes of similar maturity, advanced eight basis points to 213, implying an average annual inflation rate of 2.13 percent over the period. The Tel-Bond 40 Index of corporate bonds declined 0.1 percent to 281.62.

The shekel gained for a third day, rising 0.3 percent to 3.7283 a dollar at 4:43 p.m. in Tel Aviv.