IDB Development 2018 Yield Drops on Clal Stake Sale Talk

IDB Development Corp.’s bonds due 2018 rose for a third day as the debt-strapped Israeli company tries to sell control of Clal Insurance Enterprise Holdings Ltd.

The yield on IDB Development’s 1.5 billion shekels ($419 million) of 4.5 percent bonds due June 2018 dropped 30 basis points, or 0.30 of a percentage point, to 8.29 percent, the lowest since July 11, at the close in Tel Aviv. Shares of the nation’s third-biggest insurance company rose as much as 5 percent, the most since May 28, before moderating to a 0.7 percent gain to 65.34 shekels.

IDB Development said it’s in advanced talks with a group of investors in China to sell its controlling 55 percent stake in Clal Insurance at a valuation reflecting a 28 percent premium. The Tel Aviv-based company last month hired Aon Benfield Securities to find a buyer for the insurer. An Israeli court last month gave IDB Chairman Nochi Dankner until Aug. 22 to sell the holding.

“Time is running out as the deadline for Clal’s sale is approaching fast, and so far IDB hasn’t yet received a binding agreement,” Meir Slater, an analyst at DS Securities & Investments Ltd., said by phone from Tel Aviv. “Offers for the insurance unit at a premium will be good news for IDB’s bondholders.”

IDB Development’s parent, IDB Holding Corp., has been trying to sell assets as the company struggles to meet payments on about 2 billion shekels of debt. Hang Lung Group Ltd. today denied a report in daily Calcalist that the Hong Kong-based company is in talks to buy as much as 33 percent in Clal with an option to purchase the remainder of IDB Development’s stake.

Suitors Exit

IDB Holding’s shares today advanced 2.7 percent in almost triple the three-month daily average volume. The yield on the parent’s 1.1 billion shekels outstanding of bonds due December 2020 fell 27 basis points, or 0.27 of a percentage point, to 64.81 percent, the lowest since July 8.

American International Group Inc. has quit the competition to buy control of Clal, Globes reported yesterday. Earlier this week, IDB Development said an offer by a foreign fund that it reported on May 24 didn’t materialize.

Koor Industries Ltd., a unit of IDB Development, said this week that it is mulling the occasional sale of its holdings in Credit Suisse Group AG. Koor owns 2 percent stake of the financial services company, according to data compiled by Bloomberg. Earlier this month, Argentine businessman Eduardo Elsztain decided against further investment in IDB Holding after the company’s debt holders approved a restructuring plan that would convert debt into shares of IDB Development.

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