The trust company of Investec Bank decided yesterday to convene a special meeting of bond holders of Rogosin Enterprises next Sunday. The meeting is slated to center on a demand for the immediate repayment of an outstanding debt and for the court system to appoint a receiver for the company.
Investec's decision follows an announcement last Thursday by Rogosin, controlled by Ezra Harel, that it lacks the resources to make its next payment of NIS 18.6 million to its bond holders. Rogosin's overall debt to the bond holders totals some NIS 76 million.
The price of the bonds issued by Rogosin plummeted by 20 percent on Thursday, following the company's announcement, and over 3 million units were traded. The bond value slipped another 1.65 percent in trading yesterday, as 550,000 bonds traded hands. Some of the sellers were institutional investors eager to unload the bonds at almost any price. Buyers were principally bond portfolio managers and brokers.
The price of the bonds now reflects less than a third of their adjusted value - 35.6 agorot is the market price, compared to the adjusted value of 120 agorot. In other words, the bonds were issued at a price of 100 agorot and because they are linked to inflation, the debt on each bond grew to 120 agorot. However, due to the fears of investors that Rogosin will default on this debt, the price sank by tens of percentage points.
"On paper," the company owes about 120 agorot per bond to those who purchase the bond today at 36 agorot. This low price is apparently the reason for the large turnover in Rogosin bonds over the last two trading days.
The assessment of investors is that the company has sufficient assets to cover at least a third of this outstanding debt to its bond holders. This assessment is also the basis for the Investec Bank's call for the company to be liquidated.
The large turnover in the bonds over the past two trading sessions sparked rumors that Ezra Harel himself was among those purchasing these bonds. The reasoning is that Harel also believes that the company's assets are greater than its debt to bond holders. But these rumors appear to be unfounded.
Against the background of this assessment, investors reacted skeptically to the company's declaration on Thursday that it was unable to make payment on the bonds. This type of declaration is regarded as an attempt to help reach a more comfortable deal with the bond holders, or drive the bond's purchase price lower.
Mickey Barnea, the CEO of Rogosin, said at a meeting of bond holders on Wednesday that an investor interested in purchasing Rogosin's stake in a German port was planning to issue a purchase offer for the bonds. Barnea also mentioned the possibility of negotiating a financial settlement with bond holders for partial repayment of Rogosin's debt.
According to one market source yesterday, no investor would agree to sell the bond at a price of 36 agorot because the return would be higher even if the company ultimately went into receivership.
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