Business in Brief - Bank of Israel Raises Growth Outlook, Holds Interest Rate Steady

Securities Authority raids Babylon offices; Electra Consumer plans cost cutting; Tshuva raises $605m for New York luxury housing.

David Bachar

Bank of Israel raises growth outlook

The Bank of Israel on Monday raised its economic growth estimate for next year, but indicated that interest rates would begin rising only in early 2016. At its monthly policy meeting the Bank of Israel kept its benchmark interest rate at 0.25% for a fourth straight month, as expected, saying it expected the economy’s recovery from the Gaza war to accelerate. The central bank estimated that the 50-day conflict, which hurt manufacturing, tourism and consumer spending, shaved 0.3 percentage points off annual economic growth. However, in updated forecasts, the bank raised its 2014 economic growth projection to 2.5% from 2.3% and said it expects growth of 3.2% next year, up from a prior estimate of 3%. It also forecast 3% growth for 2016. In keeping rates steady, policymakers said recent data point to a recovery, “with the economy’s expected return to its path of growth from before the [war] expressed in a relatively high growth rate in the coming quarters.” (Reuters)

Securities Authority raids Babylon offices
The Israel Securities Authority raided the offices of troubled tech company Babylon yesterday and confiscated personal computers used by Alon Carmeli, who served as CEO of the company until November 2013. Neither the securities authority nor Babylon, whose translation software had been the basis of the company until that part of the business was sold, would comment on the reasons for the raid, but Babylon shares dropped sharply on the news. The company ended down 0.2% for the day at 1.99 shekels (51 cents), although it was down as much as 8.2% during trading. Babylon shares have tanked over the past year after Google rescinded a key contract in response to complaints by search engine users. The company has virtually no operations left after having sold its translation business, and is searching for a new direction. In the third quarter, its revenues were just 26 million shekels, down from 152 million a year earlier. (Omri Zerachovitz)

Electra Consumer plans cost cutting
Electra Consumer Products, the maker and importer of home appliances whose share price has plunged 65% this year amid toughening competition, said yesterday it was undertaking a cost-cutting program six months after Zeev Kalimi took over as CEO. Electra said it aimed to cut annual spending by a pre-tax 50 million shekels ($12.7 million) while building up its e-commerce operations and improving logistics, including home delivery of its products. Electra, which is controlled by Elco Holdings, said it would take a 40 million shekel charge this year against the cost of putting the plan into effect during 2015. Electra shares closed 3.2% higher at 15.64 shekels. (Michael Rochvarger)

Tshuva raises $605m for New York luxury housing
A partnership between Yitzhak Tshuva’s closely held Elad Group and New York-based real estate development company Silverstein Properties has secured $605 million in financing from a luxury housing projected called One West End, slated for Manhattan’s Upper West Side. The 80-20 partnership got funding from Wells Fargo Bank and Bank of America-Merrill Lynch for the 43-story, 662-unit tower. The project, which will feature a $20 million penthouse, has come under fire for a planned separate entrance for tenants of the more affordable apartments to be included in the development. Elad is also seeking hundreds of millions of dollars to finance a second New York real estate project called 346 Broadway in the Tribeca area. The luxury housing project is being developed in the building that used to house the Manhattan Criminal Court. (Michael Rochvarger)

Energy shares, Europe weigh on TA-25

Energy shares continued to weigh on the Tel Aviv Stock Exchange on Monday. Lower European bourses, hit by news that Greece would be calling early elections, also pushed the TASE lower, with the TA-25 index down 0.4% for the day at 1,456.83 points. The TA-100 lost 0.6% to 1,280.95 on turnover of 1.64 billion shekels ($420 million). Gas shares were down, led by Ratio, with a 4.7% drop to 32 agorot, and Delek Drilling, on a 4.6% decline to 14.70 shekels. Delek Group, which has big energy holdings, ended down 1.2% at 992 shekels. IDB Development Corporation jumped 18.6% to 1.50 shekels after saying one of its two controlling shareholders, Eduardo Elsztain, had agreed to participate in an 800 million shekel rights offering. Africa Israel said it would buy back 400 million shekels of its Series Kaf Vav and Kaf Zion bonds. Another property developer, Azrieli Group, dropped 1.2% to 129.50 shekels after saying it planned to raise 700 million shekels in bonds in February, its first since going public four years ago. (Dror Reich)