Treasury to Issue Leverage-fund Tender Today

The Finance Ministry is set to issue a tender today for the creation of two leverage funds as part of the government's plan to aid debt-ridden, credit-hungry Israeli companies and shore up the sagging corporate-bond sector. Bids are due by March 1.

On Friday the treasury announced that six groups met the prequalification requirements for managing the new fund and can go on to compete for the tender. A seventh group is expected to secure approval after submitting additional details to the tender committee.

Among the groups expected to submit bids are a group led by Udi Hillman, Yaacov Elinav and Kuti Gavish; Eyal Gabai, Uri Yogev and Roi Machnes; a group headed by Gabi Perl and Zuriel Lavie; a group headed by Aharon Tzitrin and Chen Berdichev; and the private equity group KCPS Israel Private Equity Partners, which put together a special team for the project.

The funds, which are to be a joint public-private venture, will lend money to companies with cash-flow problems stemming from the global financial crisis, helping them rebuild their businesses and repay their debts.

As part of their prequalification bids, candidates competing for the right to operate the funds submitted letters of intent from institutional investors promising to invest well above the minimum amount of about NIS 400 million.

The state intends to put up to NIS 5 billion into the leverage funds, against the sums invested by the institutionals, and will guarantee a minimum annual return of 4%. The state will also assume most of the risk if the funds end up losing money.

The fund managers will have a range of tools to help the ailing companies repay their loans and stay in business. The hope is that they will bolster confidence in the ability of companies to meet their obligations and help pull the non-bank credit sector out of its crisis.