Elbit Imaging Bonds Drop on Report Hapoalim Seeks Receivership

Elbit Imaging Ltd.’s 2015 bonds fell, sending the yield to the highest in almost five months, after Calcalist reported Bank Hapoalim Ltd. seeks to appoint a receiver for the company’s shares. Government bonds dropped.

The yield on Elbit Imaging’s 5.7 percent notes maturing October 2015 soared 281 basis points, or 2.81 percentage points, to 30.61 percent, the highest since Sept. 27, at the close in Tel Aviv. The government’s 4.25 percent benchmark bonds due in 2023 yielded 4.06 percent, up one basis point.

Bank Hapoalim intends to put Elbit Imaging shares it has as collateral into receivership, Israeli daily Calcalist reported today. This comes as the debt-ridden company, which last week asked to delay 82 million shekels ($22 million) in principal payments due Feb. 20, is trying to start talks with bondholders and reach a framework that will enable it to meet its commitments.

“Bank Hapoalim’s move brings a bigger and more aggressive player to the debt negotiations making it harder to reach a debt settlement in the near term,” Adar Etzioni, head of research at Tel Aviv-based Migdal Capital Markets Ltd., said today by phone.

Bank Hapoalim spokeswoman Ofra Preuss declined to comment on the report. A phone call and a text message to Motti Scherf, a spokesman for Elbit Imaging, weren’t answered. The yield on Elbit Imaging’s 5 percent bonds due April 2020 rose for a second day, increasing 288 basis points to 61.62 percent.

Rating Cut

S&P Maalot on Feb. 5 cut Elbit Imaging’s rating by five levels to ilCC, two grades above default, saying it’s possible the company may miss debt payments in the immediate term. The Tel Aviv-based company, which invests in real estate and medical companies, faces more than 600 million shekels in debt payments this year and has reserves of about 80 million shekels, Moody’s Midroog said last month.

The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, declined for a second day, slipping 0.1 percent to 283.27. Israel’s average annual inflation expectation fell two basis points to 2.12 percent, according to the two-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government debt of similar maturity. The government’s target range is between 1 percent to 3 percent.

The shekel weakened for a second day, depreciating 0.1 percent to 3.6962 a dollar at 4:41 p.m. in Tel Aviv. The currency has gained 0.3 percent this month, according to data compiled by Bloomberg. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, rose for the first time since Feb. 4, gaining two basis points to 1.72 percent.

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