The three U.S. property companies planning road shows ahead of bond sales on the Tel Aviv Stock Exchange are likely to encounter very reluctant investors, following Urbancorp’s bankruptcy filing last week, market sources said Sunday.
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“There’s simply no investors’ appetite for buying the bonds of American and Canadian real estate companies, and for sure some of the upcoming issues will be delayed at least for the short term,” said one capital market source, who asked not to be identified.
The market’s nervousness was demonstrated even before the fall of Urbancorp, when real estate investment trust KBS said last Wednesday it wanted to make a technical change to the 1 billion shekel ($270 million) in bonds it had successfully sold two months earlier. The price of the bonds tumbled until a conference call clarified the matter.
But for three companies planning issues, the challenges will be greater. World Class Capital Group, a Texas-based group founded and led by Nate Paul; Princeton Holdings and Namdar Realty Group, led by Igal Namdar, all invest in income-producing properties rather in the more speculative side of the business of property development.
But from a balance sheet perspective, they are highly leveraged and carry low credit ratings of A-minus or less. “There’s no doubt that Urbancorp’s woes are a seminal event. The underwriters still don’t get it. ... They’re going to have to realize that the rules of the game have changed,” said the source.