IDB Development Yield Drops to 2-Year Low as Clal Sale Looms

The yield on IDB Development Corp.’s bonds due 2018 dropped to a two-year low as the debt-strapped Israeli company expects to sign an accord in the coming days to sell Clal Insurance Enterprise Holdings Ltd.

The yield on IDB Development’s 1.35 billion shekels ($379 million) of 4.5 percent bonds due June 2018 dropped 46 basis points to 5.82 percent, the lowest since August 2011, at the close in Tel Aviv. Shares of parent IDB Holding Corp. advanced 1.7 percent to 5.609 shekels, the highest since July 14.

IDB’s board approved the sale of its 55 percent stake in Clal Insurance at a 25 percent premium to the insurer’s share price, the company’s lawyer Amir Bartov told an Israeli court today. The Tel Aviv-based holding company said last week it was in talks with a group of investors in China. An Israeli court last month gave IDB Chairman Nochi Dankner until Aug. 22 to sell the stake.

“The progress on the Clal sale is positive but the sale itself won’t be enough to solve the group’s debt problems,” Avihay Hermon, a trader at Tel Aviv-based Israel Discount Bank Ltd., said by phone today. “At most, the Clal deal will give Dankner more to secure further external investments.”

IDB Holding has also been trying to sell assets as the company struggles to meet payments on about 2 billion shekels. IDB told the Tel Aviv court today it’s in initial talks with investors, including Argentine Eduardo Elsztain, for investments in IDB Holding.

The yield on IDB Holding’s 5.1 percent of 1.1 billion-shekel bonds due December 2020 fell 88 basis points, or 0.88 of a percentage point, to 61.71 percent. The Tel Aviv court today set August 11 as the deadline for bondholders of both IDB Holding and IDB Development to vote on a number of debt restructuring plans, which could see Dankner ousted.

Koor Industries Ltd., a unit of IDB Development, said on July 22 it’s mulling the occasional sale of its holdings in Credit Suisse Group AG. Koor owns a 2 percent stake in the financial services company, according to data compiled by Bloomberg.

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