Morgan Stanley likes Israel Chemicals: Morgan Stanley on Wednesday upgraded Israeli potash producer ICL to Buy, from Outperform, and set its 12-month price target at NIS 56. That’s a 20 percent upside from the Wednesday closing share price. Analyst Amy Walker says ICL is her favorite among European fertilizer stocks but warns against taking the spike in commodity prices, mainly of corn (the biggest potash consumer of all crops) as a reason to scurry for fertilizer shares in general. The correlation between corn prices and fertilizer share prices has weakened from early 2010, she says; also, each fertilizer stock has its own correlation with corn. ICL has the best risk/reward ratio of the European fertilizer pack, Walker says.
Banks watchdog highlights "tycoon" risk: Also on Wednesday, the supervisor of banks, a division of the Bank of Israel, released its annual report. While every bank in the world face heightened risk at this time, supervisor David Zaken chose to highlight two risks faced by Israeli banks in particular: the large proportion of credit they've allocated to Israel's biggest business groups (unfondly known as "the tycoons") and the risk in the mortgages market. The heavy concentration in lending – i.e., the huge amount lent to "the tycoons" – could seriously impair the banks' capital. Zaken's division calculates that at yearend 2011, the banks had NIS 10 billion outstanding to business conglomerates whose bonds were trading at yields above 12 percent, which is well into junk territory. He also estimates that the credit risk on mortgages has increased by 30 percent in five years to NIS 200 billion.
Yitzhak Tshuva sells properties in Canada…: Elad Canada, a privately held company of the Yitzhak Tshuva property and energy empire, sold buildings in Montreal's Olympics village and a few others for a total of NIS 827 million. One reason for the selloff is to increase liquidity of the parent group; another is that the Canadian property market seems to be steady, which is another way of saying that its betterment potential has been exhausted.
…and annoys Migdal Capital Markets: Apropos Yitzhak Tshuva and deleveraging, Migdal Capital Markets has come out swinging against the debt arrangement proposed for another of the business baron's vehicles, Delek Real Estate. The haircut (debt default) that Delek Real Estate proposes could reach 88 percent and the letter it wrote to investors is clear as mud, Migdal Capital Markets complains, demanding that the company publish a document people can actually understand. The brokerage also says that Delek Real Estate's claim that Tshuva is handing over a billion shekels of his own money, which is unprecedented in the annals of Israeli capital market meltdowns and secures the bonds, is "groundless." Migdal Capital Markets calculates Tshuva's contribution at NIS 150 million, for which he'd be immune from legal claims. Delek Real Estate owes bondholders NIS 2.15 billion.
With reporting by Yoram Gabison, Sivan Aizescu, Michael Rochvarger and Shelly Appelberg
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