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Among the many assets that Yitzhak Tshuva owns is Elad, a privately held real estate investment company. Among the many assets that Elad owns is MetCap, a Canadian portfolio of assets that it bought three and a half years ago. Now Tshuva wants to sell it, but he can't. Why can't he? Because all the portfolio assets, namely 15,000 residential units in various cities, are serving as collateral for bonds that Elad issued to raise money to buy MetCap in the first place.

On October 21, Hermetic Trust is convening a general assembly of bondholders. The bondholders will be asked to vote on exchanging all of Elad Canada's collateral with collateral from the parent company, Elad Group, which will therefore undertake to repay the debt in full.

If they agree, the bondholders will lose the collateral they hold, but on the upside, the bonds they hold should be upgraded (making them closer to blue chip). Why? Because Elad Canada now has a Stable Outlook AA rating, while three years ago when issuing the bonds, its rating was AA-minus.

A majority of at least 75 percent of all bondholders is required to ratify the exchange of collateral.

A senior source in the capital market told TheMarker that the offer does not look attractive. According to the source, if Tshuva wants to sell the assets, he needs to pay the debt or deposit the proceeds of the sale for bondholders. The source believes that the improved rating is not important, and increasing Elad Group's liability to bondholders is problematic. ()