Investors skeptical about Digal repayment
Could it be that capital market circles don't have complete faith in businessman Meir Shamir?
Could it be that capital market circles don't have complete faith in businessman Meir Shamir? Bonds of Digal Investments & Holdings are trading at very high "junk" yield levels of around 60%, which indicate deep distrust in the company's ability or intention to repay its bondholders in full. Mivtach Shamir, which is Shamir's flagship company, owns 35% of Digal.
Digal wouldn't be the first company to worry the investment community. The surprising thing is that Meir Shamir and Digal's controlling shareholder, Yehuda Levy, haven't done anything to assuage the concerns. When a company's bonds are trading at yields that high, if the company really does mean to return its debts to bondholders, it would be usual for the controlling shareholders to repurchase the debt themselves, or through their companies.
At the least, knowing the company means to repay the debt, they would make an easy, safe profit.
At this point Shamir and Levy could repurchase the Digal bonds for 40 agorot each, and when the bonds mature, they would get 100 agorot apiece. That's one sure source of profit.
Also, the move would deliver a clear message to the capital market that the controlling shareholders know the company will repay its debt.
The investment in Digal is one of Shamir's poorest, though its weight in Mivtach Shamir's portfolio is tiny. Shamir paid $6.2 million for 35% of Digal in 1999, or, NIS 71 million at the time.
Now Digal is worth NIS 27 million.