Bezeq 2022 Yield Rises to 5-Week High Before Private Debt Offer

Bezeq Israeli Telecommunication Corp. 2022 bonds fell, lifting the yield to the highest in more than a month, as the country’s largest phone service provider today plans to sell debt in a private placement.

The yield on Bezeq’s 958 million shekels ($261 million) of 3.7 percent notes maturing December 2022 jumped 10 basis points, or 0.10 percentage point, to 2.38 percent, the highest since April 11, at the close in Tel Aviv. The yield dropped to a record low on May 19. The shares gained for the first time this week, rising 3.4 percent to 4.65 shekels. Bezeq this month paid out dividends totaling 1.36 billion shekels.

Bezeq seeks to raise as much as 600 million shekels from a sale of its Series 6 and 7 notes, which are rated ilAA, the third-highest investment grade at Standard & Poor’s. The fixed-line and wireless services provider, which last sold bonds to the public in 2011, had total debt of 9.4 billion shekels at the end of March. It expects free cash flow of 2.7 billion shekels in 2013, according to a company statement on May 13.

“Under the current low interest-rate conditions it makes sense for Bezeq to raise money to refinance debt and to be able to continue to pay out high dividends,” Ori Licht, head of research at IBI-Israel Brokerage & Investments Ltd. in Tel Aviv, said by phone. “The company may continue to try and raise money in the near future in this attractive environment.”

The Bank of Israel has gradually cut its borrowing rate to 1.5 percent, a three-year low, from 3.25 percent in 2011 to boost economic growth.

Bezeq said May 13 profit in the first quarter fell 15 percent to 497 million shekels amid an increase in competition.

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