A major institutional investor is expected to oppose the debt arrangement that Delek Real Estate proposed on Friday, according to a senior figure at the institution. The proposed deal, as reported by TheMarker on Sunday, would entail a 60% loss to bondholders.
The anonymous source at the financial institution called the arrangement a "joke." He insisted that associates of Delek Real Estate controlling owner Yitzhak Tshuva are trying to mislead investors, promising to inject NIS 1 billion if they go along with the scheme when in fact only NIS 27 million will be injected.
No sane investor would buy the bonds when an escape clause enables the owner to avoid the cash injection," the source said. According to the agreement, in the event of corporate default within 18 months on the part of Delek Real Estate or subsidiaries DGRE or Elad Israel Residence, Tshuva will be released from his obligation to provide any further funding.
"If any creditor demands an immediate $10 million payment and Tshuva decides not to provide the cash the company could go into liquidation, exempting Tshuva from injecting NIS 250 million," the source explained. "And where would the money come from? This is a company on the verge of a NIS 1 billion deficit, according to Prof. Amir Barnea. Bank Leumi, which holds NIS 183 million of the debt, already made it clear that it wouldn't agree to a haircut, so the arrangement can't go through."
