Shaul Elovitch is expected to accede to demands from his bank creditors to sell off half of his controlling stake in Bezeq over the next few years, with the aim of helping settle 1.2 billion shekels ($340 million) in debt his Eurocom Group owes.
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Sources said Elovitch is close to a preliminary agreement on the debt after intensive negotiations with creditors since it surfaced June 20 that the Israel Securities Authority is investigating him and a host of executives for securities violations, which center on Bezeq’s 2015 acquisition of Elovitch’s stake in the Yes satellite television broadcaster.
News of the unfolding probes has sent the share price of Elovitch group companies reeling, with some of them falling by as much 50%. The result is that the net asset value of Eurocom – Elovitch’s closely held investment vehicle – has plunged, by some estimates to nil and by others to a negative 200 million shekels. The company has little or no cash on hand.
On Sunday, news of the talks set off a rally in the stocks. Bezeq finished the day up 4.2% at 5.47 shekels, B Communications ahead 9.3% at 54.77 and Internet Gold up 12.9% at 25.54. It was the biggest gainer among TA-125 stocks for the day.
Elovitch controls Bezeq through a pyramid of companies. Eurocom controls 55.3% of Internet Gold, which in turn controls 64.8% of B Comm. B Comm has a 26.3% share in Bezeq, Israel’s biggest telecommunications group.
Eurocom’s single biggest creditor is Israel Discount Bank, which is owned 500 million shekels, followed by Bank Hapoalim, which is holding 350 million in debt. The two banks have taken the lead in the debt talks. Other creditors include First International Bank of Israel, with 30 million, and another 265 million owned by Eurocom Real Estate to Mizrahi Tefahot Bank and a group of institutional investors.
The latter debt belongs to Eurocom Real Estate while the rest belongs to Eurocom Communications.
Not everyone is convinced that Elovitch’s offer to cede control of Bezeq, which he acquired in 2010 after a long quest to become the dominant player in Israel’s telecommunications industry, is for real.
Liran Lublin, telecommunications analysts for the IBI investment house, said he believed Elovitch was playing for time and seeking to ease the pressure from the banks and the stock market to act. Lublin predicted that instead, Elovitch would opt to sell some 300 million shekels in real estate assets, including the Eurocom House office tower.
“If the sum total of the assets doesn’t equal his debt, you have to consider that the banks would be happy at this stage over a significant reduction before they demanded he sell off shares in any of the companies in his pyramid,” Lublin said in a report on Sunday.
Analyst keen on Bezeq shares
Meanwhile, Lublin said he was keen on Bezeq and urged investors to take advantage of the drop in prices to buy Bezeq stocks and B Comm and Internet Gold bonds. He set a target price of 60.30 shekels for Bezeq shares.
Eurocom’s rapidly disappearing NAV – a figure that reflects the total value of the company’s assets minus its debt – has the banks nervous. Unlike other tycoons, Elovitch never pledged any personal assets against his company’s debt and observers said he is not interested in pumping more cash into Eurocom.
That leaves him with little choice but to sell assets to meet bank demands that he pay down some 250 million to 300 million shekels of the 1.2 billion in debt over the coming year. In talks with bankers, they sought a plan for Eurocom to cash out on up to 600 million shekels in assets over the next few years.
Sources said the other alternative to selling down Eurocom’s stake in Bezeq was to divest holding in non-core businesses, like the alternative energy company Enlight, in which he holds a 23% stake worth about 150 million shekels. Eurocom Real Estate could be paid down with the sale of property assets, such as Midtown Tel Aviv.
All that would buy Elovitch time to sell his 56% in Spacecom, the operators of communications satellites. His stake in Spacecom today is worth only 256 million after its Amos 6 satellite was destroyed in a launchpad explosion, but the figure could double by 2020 after it launches a replacement.