Yitzhak Tshuva
Yitzhak Tshuva, controlling shareholder of Delek Group. Photo by Bloomberg
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Ilan Assayag
Nochi Dankner, left, with his crony the "X-ray Rabbi", Ya'akov Ifergan. Photo by Ilan Assayag

While other Israeli business empires - Nochi Dankner's IDB, Yossi Maiman's Ampal and Moti Zisser's Elbit Imaging - are sinking under the weight of vast debts, Yitzhak Tshuva's Delek Group is one tycoon-controlled group still in full bloom.

That was amply demonstrated by Delek Group's third-quarter results, which were released on Friday.

Delek Group, the holding company at the top of Tshuva's conglomerate, reported netting NIS 93 million for the quarter, down 34% from the same quarter of 2011, but that's because of a technicality. Accounting rules blocked the company from including a NIS 208 million net gain on selling shares in its subsidiary Delek US Holdings.

The gain was booked as shareholders equity in order to boost accumulated earnings that could be distributed as dividends. Net income for the first nine months totaled NIS 243 million, compared with NIS 451 million in the same period of 2011.

Delek Group stock has gained nearly 23% on the Tel Aviv Stock exchange this year, to NIS 856 per share on Monday, reflecting a market cap of NIS 9.7 billion.

Adjusted for dividend distributions, Delek's share price is near its 2007 peak.

A holding company with interests in energy, infrastructure, finance and the automotive industry, Delek's good fortune can be credited, to a large degree, to Tshuva severing the flailing firm Delek Real Estate from the group.

Unlike other tycoons, Tshuva is also enjoying the fruits of a successful foray into the energy business - a factor confirmed by Australian company Woodside agreeing yesterday to take a 30% stake in the giant Leviathan gas field at a stunning $8.3 billion valuation.

Fat dividends

Since the beginning of 2009, the company has distributed dividends totaling about NIS 2 billion - the latest being a NIS 65 million payout announced with the third-quarter results. Tshuva's 65% stake in Delek Group means he has been the recipient of about NIS 1.3 billion - money that has helped him pay off his personal debts and bail out of real estate ventures gone bad.

The group's top-level companies carry financial liabilities estimated at NIS 10.5 billion in total liabilities, including NIS 8.4 billion in bonds. This reflects net financial liabilities of NIS 7 billion after deducting NIS 3.5 billion in liquid assets.

After paying off about NIS 1 billion in debts over the past few months, Delek Group is left with NIS 1.5 billion in cash - which should be enough to cover all its debt payments until the beginning of 2014. The company's bonds are trading at low yields of up to 5%, so if it needed more cash it could raise it at lower interest charges in the bond market than from the banks.

The capital market's negative sentiment toward Tshuva following the 70% haircut he gave investors in Delek Real Estate's debt restructuring is still keeping investors away, but this could be forgotten quite soon.

The main contribution to Delek Group's quarterly profit was its NIS 232 million share in the earnings of Delek US, run by Ezra Uzi Yemin, up from NIS 193 million the year before. The group's finance and insurance operations - concentrated in Phoenix Holdings, Excellence Nessuah Investment House, and the Republic Group in the United States - contributed NIS 46 million in income, as opposed to NIS 68 million in losses the same quarter last year. Fuel operations in Israel and Europe - including publicly owned Delek Israel and privately owned Delek Europe - together made up NIS 41 million of the group's quarterly profits as against NIS 15 million in the parallel period.

Agmon's loss was Tshuva's gain

Two years after Delek Group handed control of Delek Automotive Systems over to Gil Agmon, with the transfer of a 22% stake in the company for NIS 50 per share while retaining 31% ownership, it seems Tshuva got the better end of the deal by far. Shares in the car importer and distributor are now trading at just NIS 24.30 (unadjusted for dividends ), and the financing consortium backing the deal, led by Bank Hapoalim, is exposed to Agmon's personal debts amounting to over NIS 800 million with nothing but his 38% holdings in the company.

Delek Group's quarterly reports indicate that its plan to cash in on its 50% share in IDE Technologies for NIS 800 million to NIS 1 billion won't be carried out anytime in the foreseeable future. The company canceled a NIS 40 million deferred tax provision previously made for the desalination enterprise. A project-based company jointly owned with Israel Chemicals Ltd., IDE's results are heavily subject to timing issues for recognizing revenues and earnings. In that vein, IDE, managed by Avshalom Felber, finished the third quarter with a $3 million operating loss but registered net income of $4 million, as opposed to $2 million for last year's equivalent period, due to financing income.

Roadchef, Delek's British 100%-owned subsidiary - 75% of which was offloaded two years ago by Delek Real Estate to help cover its massive debt - presented EBITDA for the quarter of NIS 67 million, 8% higher than the year before. The firm operates 28 roadside service stations in 20 locations along Britain's highways. If Roadchef's results continue to improve, Delek might exit with a handsome gain denied to the frustrated Delek Real Estate bondholders.

Following its recent failure to sell off most of its 76% stake in Gadot Biochemical Industries to FIMI Opportunity Fund, Delek Group continues to be saddled with the ailing company. At the end of September, its financial deficit stood at $43 million, and $50 million in liabilities to banks and its bondholders remains largely at the mercy of continued support from its parent. Delek has provided the company with $59 million in loans and has committed to injecting a further $36.7 million if necessary.