Trans-Israel Highway franchisee Derech Eretz is in talks to issue NIS 1 billion in bonds to institutional investors such as provident funds, pension funds and insurance companies. The issue is likely to be held in December.
The funds raised will include options and shares slated to finance the construction of Section 18 of the highway - the road's northern-most stretch. The government has not yet determined which franchisee will construct and operate the section and is in talks with Derech Eretz to do so.
The only significant condition the government has set for Derech Eretz is that it come up with the financing for Section 18, so the company came up with the option to raise funds through a bond offering.
The stretch from Barkai Junction to Elyakim Junction is expected to cost $215 million to build. The new project represents 25 percent of Derech Eretz's construction and investment in the original road.
In addition to the advantage of adding 18 kilometers to the highway, the new stretch will help increase the volume of traffic on the original road and boost Derech Eretz's revenues, while decreasing the government's risk from guarantees it provided on some of the revenues. Among other things, the new northern stretch will encourage residents in Haifa's suburbs and lower Galilee residents to use the toll road.
Four major underwriters are in talks on the bond issue - IBI, Gmul, Leader and Leumi & Co - but Derech Eretz plans to reach the finish line with only three of them.
This is the first bond issue of this sort for such a large BOT project. Derech Eretz hopes the bonds will be rated higher than the 99-minus ratings agency Ma'alot granted its last issue, which was before construction on the highway had begun.
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