IDB Bond Yield Drops as $75 Million Investment Option Extended

IDB Holding Corp.’s 2020 yield fell the most in a month after the company’s biggest shareholder agreed with an Argentinian businessman to extend the terms of a $75 million investment agreement.

The yield on IDB’s 1.07 billion shekels ($295 million) of 5.1 percent bonds dropped 38 basis points, or 0.38 percentage points, the most since March 12, to 61.69 percent, at the close in Tel Aviv. The shares rose for a third day. The yield on Israel’s 4.25 percent benchmark bonds due March 2023, retreated two basis points to 3.78 percent, taking this week’s decline to eight basis points.

Ganden Holdings Ltd., which owns 47 percent of IDB Holding, and Eduardo Elsztain agreed to extend until April 28 an option for Elsztain to buy more shares in Ganden, according to a filing to the Tel Aviv bourse today. Elsztain, who last year bought 10 percent of Ganden for $25 million, hasn’t decided whether to boost that to $100 million as IDB Holding is embroiled in debt-settlement talks with bondholders.

The extension is “positive news”, Avihay Hermon, a trader at Tel Aviv-based Israel Discount Bank Ltd., said by phone. The Israeli capital markets regulator has approved any additional investment by Elsztain into Ganden, IDB said today.

IDB Holding, which is seeking funds to meet payments on about 2.06 billion shekels of debt, proposed last month to transfer 15 percent of its shares to bondholders, as well as a 500 million-shekel cash injection. The debt settlement hasn’t been approved yet, the company said in a statement today. Dalet bondholders voted against taking further legal steps against the company, it said.

Debt Commitments

“The company still has to come to an agreement with bondholders which will include a haircut,” Hermon said. “Looking ahead it’s not clear how the company will be able to meet its commitments as it struggles to sell assets.”

The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, advanced for the first time since April 7, rose 0.1 percent to 286.34.

Annual inflation may have eased to 1.4 percent in March from 1.5 percent in the previous month, the first deceleration since November, according to the median estimate of 11 analysts surveyed by Bloomberg. The data will be released on April 15. The government’s price target range is between 1 percent to 3 percent.

One-year interest-rate swaps, an indicator of investor expectations for rates over the period, fell less than one basis point to 1.63 percent. The Bank of Israel last month kept interest rates at 1.75 percent.

The shekel strengthened 0.4 percent to 3.6290 a dollar, taking this year’s appreciation to 2.9 percent this year, the fourth-best performer among 31 major currencies tracked by Bloomberg.

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