Tycoon Garage Sale Raises $720m in Short Order for Yitzhak Tshuva’s Indebted Delek

Eran Azran
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A gas pipe test in Ashkelon, 2019.
A gas pipe test in Ashkelon, 2019.Credit: Hodi Broker
Eran Azran

Beset by creditors and lawsuits, the Israeli billionaire tycoon Yitzhak Tshuva has been selling assets left and right – a total of 2.5 billion shekels ($720 million) worth in the last few weeks.

The latest asset sales, announced by Tshuva’s holding company, Delek Group on Sunday, was for two companies controlled by its Delek Israel unit for a combined 1.1 billion shekels.

In the first it reached terms to sell rights to Delek Pri-Glilot and land where the company operates gasoline terminals in Haifa, Ashdod and elsewhere to Yeheil Abu for 720 million shekels. In the second, Delek Israel agreed to sell to Rapac Energy electric-power stations in Ashkelon and Soreq for 367 million shekels.

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The latter still valued the power stations at far less than the 550 million shekels they are booked at in Delek’s Israel’s financial statements. The big discount reflects the pressure Delek is under to generate cash.

Delek’s debt, including principal and interest payments, stands at a massive 10 billion shekels. Of that, 1.5 billion shekels is owed to Israeli and foreign banks, among them Japan’s Nomura, while debt to bondholders is approximately 6 billion. About another 1.5 billion is owed by Tshuva personally to the bank.

One of Israel’s few surviving tycoons, Tshuva was riding high and shuffling his once far-flung assets into oil and natural gas. However, plunging energy prices and a badly timed, leveraged acquisition of North Sea oil properties from Chevron has left Tshuva struggling to meet debt payments.

Yitzhak TshuvaCredit: Tomer Appelbaum

Last month he won a year’s grace from bondholders to raise cash. Under the agreement, the banks are entitled to accelerated debt repayments and enhanced collateral. The agreement calls for the proceeds from divestments of Delek Israel assets and the Tanin and Karish natural gas fields as well as future equity fundraising to be directed to repaying the bank debt.

Delek Group shares, which dropped close to 90% in the first quarter to a low of 61.50 on the Tel Aviv Stock Exchange, have since clawed back some of their losses. On Monday, they jumped 14.7% to close at 109.

Delek’s garage sale includes the sale of rights to the Tanin and Karish, for which it reached an agreement May 25, for 318 million shekels. That sale was also done at a discount to the book value of 345 million shekels. Delek has also divested Cohen Development to a group comprising Gideon Tadmor, George Horesh and Yitzhak Swary for 207 million shekels and sold its 18% stake in Mehadrin for 74 million.

Delek declined to say how much the proceeds of Sunday’s agreement would go to repaying bank debt. In any case, after the sales are completed, Delek Israel will have only one significant asset left – its chain of 239 filling stations and 196 convenience shops.

Meanwhile, Tshuva himself has been offloading many of his privately held assets. They include the sale of two parcels of land in Tel Aviv’s Bavli neighborhood for a combined 361 million shekels and the 195 million shekel sale of Elad Israel Homes. Tshuva is now trying to sell North American assets owned by his Elad Group.

Another way Tshuva is trying to raise cash is through equity offerings. To date, Delek has raised 137 million of 400 million shekels he pledged to raise under last month’s debt agreement. However, last week bondholders demanded Delek would have to raise as much as another 200 million.

The reason is that Mizrahi Tefahot, one of the creditor banks, is demanding that Delek retain the proceeds from the sale of the Mehadrin shares as well as its 20% of Ratio Petroleum as collateral against another loan made in connection with another Delek Group company, insurer Phoenix.

The bondholders say the proceeds from Mehadrin and Ratio are due them. If Mizrahi is going to hold it as collateral then Delek has to raise more equity, the bondholders assert. Delek rejects the claim, which risks upsetting the agreement the two sides reached in May.

Delek Group still has big debt repayments ahead: By the end of the year it must repay 2 billion shekels and another 1.7 billion in 2021. But the assets sales leave a much slimmed down business. Delek Group has two major assets – its 55% in Delek Drilling and its 100% stake in Ithaca Energy – whose dividends can be used to pay the debt owed bondholders.

Both companies, however, are highly leveraged themselves. Delek Drilling, its natural gas subsidiary, has 13.5 billion shakes in debt and its North Sea Ithaca unit is carrying another $1.4 billion. Ithaca, meanwhile, is contending with the plunge in world oil prices.

Delek’s fate is in the hand of the two units. If oil prices recover and the export deals that Delek Drilling is counting on to generate revenue from the Leviathan gas field, Delek Group will get the dividends it needs to pay off bondholders; if not, it’s not clear how bondholders will be repaid.

As for Tshuva himself, it’s unlikely Delek Group will be paying enough dividends to help him repay his personal debt. He will have to rely on the mercy of the banks.

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