Suny's bondholders see blood
Ben-Dov's company has NIS 70m in debt coming due in January.
Holders of Suny Electronic's bonds convened Wednesday to set the stage for yet another debt arrangement in Israel's capital market.
The value of Suny's shares in Scailex Corporation, the security underpinning the bonds, have been cut by half over the last month alone in the battering suffered by the telecom sector.
Scailex is the main shareholder in Partner Communications, which operates Israel's Orange cellular network.
Holders of Suny's B1, B2, and B3 bond series, totaling some NIS 248 million in nominal value, have already pledged the company's entire 78.8% stake in Scailex - worth just NIS 155 million as of yesterday morning - and became entitled to demand immediate redemption of the bonds when the security fell below 150% coverage.
This means Suny would need to ante up another NIS 200 million in assets to completely fulfill its bond covenants. But its cupboard is bare and the company, with other creditors knocking on the door, has remaining unfettered assets totaling just NIS 30 million.
Bondholders are scheduled to receive a NIS 70 million payment from the company next January.
Suny also needs to shore up security behind NIS 27 million owed to Bank Mizrahi Tefahot, its directly-owned 1.4% of Partner shares which have fallen in value to below the minimum 150% coverage required, and now needs to be increased to 160% of the debt.
Meanwhile Ilan Ben-Dov, Suny's controlling owner, flew to Hong Kong this week for a series of meetings with Hutchison Whampoa, the previous owners of Partner, to arrange an agreement on the $300 million loan extended to Scailex three years ago in the purchase. Scailex, which currently hasn't the means to defray the loan, issued Hutchison non-negotiable bonds and pledged its 12% of Partner's share capital - now worth $90 million. Hutchison has the right to reclaim its loan early if control of the Suny/Scailex/Partner pyramid changes hands or Scailex's Partner stake falls below 30%.
The pastoral setting of Wednesday's bondholders meeting at Tel Aviv's Beautiful Israel in the Park Convention Center seemed to have its effect on Suny CEO Yahel Shachar who explained the situation calmly, but failed to provide bondholders with any encouraging answers.
Of the NIS 248 million total nominal value of the bonds, NIS 10 million is held by Ben-Dov himself. Another NIS 130 million is held by the three largest bondholders: The IBI and Lehava investment houses and Jacob Luxenburg's Lapidoth Israel Oil Prospectors Corp., who have apparently long been conducting behind-the-scenes talks with Ben-Dov and his associates. Lapidoth just recently bought NIS 35 million worth of Suny and Scailex bonds. Luxenburg himself didn't attend the meeting but sent representatives.
"This is a matter of reciprocity," said one of the bondholders after the meeting. "Perhaps we have something to lose if we don't receive our money back, but Ben-Dov stands to lose even more because in such a situation he would lose all his businesses. We expect Ben-Dov to make sure Suny pays us what it owes in January 2013. The big question is whether Ben-Dov has what is needed to put into Suny and, if not, the consequences for him will be devastating."
Asked what security Ben-Dov would be ready to put up, Shachar answered: "We'll talk about it when we sit down with the bond representatives."