Top executives at Tao Tsuot are hoping to use money earned from internal transactions to pay off Bank Leumi, leaving only the bondholders at their throats.
Tao has summoned its shareholders to discuss deals selling shares of Scailex to the company (which Tao controls), and to sell shares in Tao Real Estate as well. If the shareholders vote in favor of the deals, Tao could reduce its debt to Bank Leumi by between NIS 100 million to NIS 200 million.
Tao Tsuot, which is controlled by Ilan Ben-Dov and managed by Yossi Arad, has summoned its shareholders to an assembly at the start of February, to discuss three internal transactions.
At present Tao owes Bank Leumi between NIS 400 million to NIS 500 million, down from NIS 1 billion at the start of 2008.
The less Tao owes the bank, the lower its costs of financing, which would free money to repay bondholders as well. It owes the bondholders an interest payment on February 10, which is five days after the shareholders' assembly.
Tao owns 24.7% of Scailex's share capital, which it intends for Scailex itself to repurchase for about NIS 276 million.
The second internal transaction involves selling Tao Real Estate to Ben-Dov himself for NIS 98 million, if no higher bid arrives by the end of April. Tao Real Estate owns 25% of Mall Hayam in Eilat, which is serving as collateral for an additional NIS 76 million loan from Discount Bank.
The third transaction involves Tao receiving a put option to sell a 25.7% stake in Darban Investments, an Eliezer Fishman company, to Ben-Dov for NIS 12 per share, or a total of NIS 60 million. Aside from its debt to banks, Tao owes bondholders NIS 900 million, of which NIS 100 million comes due in the next 12 months. Evidently the bond market feels the challenge is a difficult one. Yields on two series of Tao bonds have soared to 65% and 108%, attesting to deep distrust as to the company's ability to repay in full. However, Tao's B1 bonds are trading at a yield of jut 5.86% because of a guarantee from Bank Leumi.
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