Market Report / IDB Debt Deal Lifts Tel Aviv Stock Exchange

The Tel Aviv Stock Exchange edged up on the announcement of an agreement on NIS 1.8 billion in IDB Holding debt.

The Tel Aviv Stock Exchange rose on Tuesday as a debt deal for Nochi Dankner's IDB Holding Corporation paced the market higher.

IDB Holding, the company that sits atop Dankner's business group, rose 10.5%, albeit on low turnover of NIS 1 million. IDB Holding bonds were up 13% although they are still yielding 1,000%, not counting the Series Dalet bonds which yield a mere 48%. Prices for IDB Development Corporation bonds rose 2%.

Under the outline of a deal on some NIS 1.8 billion in IDB Holding debt announced late Monday, Dankner will retain control over the group. Bondholders will exchange part of the debt they're owed for a 15% equity stake and some bonds they hold for new ones. In any case, they will take a haircut.

The TA-25 index of blue chip stocks advanced 0.3% to 1,240.78 points while the broader TA-100 added 0.2% to 1,103.49. Turnover was a relatively modest NIS 831 million. Israel Chemicals led the most actives, with some NIS 103 million in shares changing hands on a decline of 0.6%.

"It's a sad day for bondholders as well as for the IDB group and Nochi Dankner," said Yani Fagot, chief strategist at Ayalon Group. "Dankner should have said to the creditors, 'I tried, I failed and I'm compensating you partially.' The cynical attempt to present the agreement as complete repayment of debt, based on the claim that the company is repaying on a nominal basis bondholders in full, shows contempt for the public's intelligence".

Global equity markets hovered near break-even as the record-breaking rally in U.S. stocks paused after a seven-session string of gains. European shares edged up, just shy of new 4-1/2 year peaks, while the Dow edged lower, and the benchmark S&P 500, a broad measure of the U.S. equity market, was down.

The pan-European FTSEurofirst 300 was up 0.01%, while the MSCI's all-country world equity index slid 0.15%. At midday on Wall Street, the Standard & Poor's 500 Index was down 0.3% at 1,552.09, and the Nasdaq Composite Index down 0.46% at 3,237.87.

In currency trading, the two main currencies lost ground to the shekel. The dollar was set at a Bank of Israel rate of NIS 3.6892, weakening 0.2%, while the euro lost 0.15% to NIS 4.7897.

"The dollar is continuing to weaken against the shekel because of the excess supply of foreign currency, although foreign operators are constantly putting a brake on any depreciation," said Yossi Fraiman, CEO of Prico Risk Management. "We believe the Bank of Israel will come out soon with declarations of its intention to act to prevent the shekel from strengthening."

$Mellanox led TA-1200 stocks higher, jumping 9.9% in heavy trading of NIS 41.5 million. Lazard Capital Markets raised its price target for the dual Tel Aviv-New York-listed semiconductor company to 69.00 in a research note issued Tuesday.

EZchip finished 5.1% higher despite a report by the research firm Kerrisdale Capital that questioned whether the maker of Ethernet network processors could survive an onslaught of new competition. Other analysts expressed doubts to Bloomberg News about the Kerrisdale report.

Other tech shares showing strong gains included biotech company Compugen, which advanced 6.2%, and Allot Communications, which gained 2.2%. TowerJazz, which soared on reports a day before that it was gaining market share in the up-and-coming Front-End Module market, retreated 0.6% on Tuesday.

Denya Cebus, the construction arm of Lev Leviev's Africa Israel Investments, rose 2.7%, after it reported higher profits and a growing orders backlog for the fourth quarter of last year. Electra Consumer Products lost 1.7% by close. The company, whose holdings include the ACE do-it-yourself and Shekem Electric chains, reported a further rebound in profit for the fourth quarter of 2012 after a poor 2011, but the results were under what analysts had forecast.

Reuters contributed to this report.

Nir Keidar