U.S. Fund Takes Step Toward Control of Bezeq

Bondholders of parent company Bcom vote to back debt bailout funded by Searchlight

A key step toward putting control of Bezeq, Israel’s dominant telecommunications company, into new hands took place on Monday, as U.S. private equity firm Searchlight Capital Partners and Israeli David Fuhrer reached an agreement to take control of Bezeq parent company B Communications.

The agreement, if completed, will mark a major restructuring of the Bezeq group. Besides putting the Searchlight-Fuhrer group in control of Bezeq, it would also bring an end to the pyramid group that has controlled the company since the era of its previous controlling shareholder, Shaul Elovitch.

Heavily indebted Bcom signed the agreement with the Searchlight-Fuhrer group after its bondholders voted earlier in the day in principal to support the terms of a debt bailout. That ended protracted negotiations that had failed on six separate occasions beforehand, including last Thursday.

After reaching a compromise over issues of collateral for Bcom’s remaining debt, bondholders voted on Monday to give their tentative backing. However, the details of the bailout remain to be ironed out before they go to a final bondholder vote.

After that, Israel’s Communications Ministry will have to approve transfer of control of Bezeq and Tel Aviv District Court Judge Eitan Orenstein, who is overseeing the debt arrangement, will have to give a nod.

“We are excited to partner with the existing stakeholders in both Bcom and Bezeq and to serve as a value-added and strategically-oriented investor that will enhance value for the companies and their customers over the long term,” Darren Glatt, a Searchlight partner, said in a statement.

Amir Bar-Lev, Bcom’s CEO added that the deal would “introduce new and experienced controlling shareholders to Bezeq” after New York-based Searchlight and Fuhrer were in control.

“Searchlight has a track record of successfully investing into a wide range of global communications companies and catalyzing successful transitions of their technology and network infrastructure over the course of Searchlight’s involvement,” he said.

Under the terms of the deal, the Searchlight-Fuhrer group will put 640 million shekels ($177.7 million) into Bcom.

Bcom said that as a result it would be able to fully repay its Series B bonds and make an early repayment of NIS 614 million on its Series C bonds. However, Internet Gold confirmed earlier in the day that its bondholders would not get back the full value of their debt, although they have approved the bailout.

Shares of Bcom, whose sole asset is a controlling 26.3% stake in Bezeq, were trading 4.3% higher at $1.94 on the Nasdaq mid-afternoon New York time. Internet Gold, which holds 52% of Bcom, was up 8% at 36 cents.

Bezeq shares fell 0.1% to close at 2.68 on the Tel Aviv Stock Exchange.

Elovitch’s telecommunications empire disintegrated under the weight of a combined police and Israel Securities Authority investigation that eventually ensnared Prime Minister Benjamin Netanyahu. He eventually lost control of his empire as Bezeq’s share price plunged and his ability to repay in highly leveraged group diminished.

David Fuhrer
Ofer Vaknin