Business in Brief: Bank of Israel Frets Over Income-producing Real Estate

Microsoft reportedly eyeing rival bid to Xilinx for Israel’s Mellanox ■ Elbit’s IMI Systems wins $200 million Pentagon contract ■ Government looks to coordinate crypto-currency regulations ■ Stocks snap three-session decline

The headquarters of Israel's central bank stands in Jerusalem, Israel, on Monday, Aug. 19, 2013.
Bloomberg

Bank of Israel frets over financial markets’ exposure to income-producing real estate

The Bank of Israel is worried about the exposure of Israel’s financial markets to income-producing real estate. In a report issued on Wednesday as part of its semiannaul Financial Stability Report, the bank said about 140 billion shekels ($37.3 billion) had been lent to the sector, equal to about 16% of all credit to the business sector. Close to two thirds of that was borrowed by publicly traded companies that have taken advantage of low interest rates to issue bonds. It estimated that about 74 billion of the credit came from pension fund assets. The Bank of Israel warned that the conditions that allowed companies to borrow and investment in income-producing real estate would not prevail for much longer. “Macroeconomic changes – among them drops in occupancy rates, lower rents or alternatively a change in capitalization rates – could lead to sharp drops in asset prices and turnover,” the bank said. “These developments could lead to deterioration in leveraging, the ability to repay [debt] and liquidity.” (Shelly Appelberg)

Microsoft reportedly eyeing rival bid to Xilinx for Israel’s Mellanox

Six weeks after the U.S. financial news network CNBC reported that the American semiconductor company Xilinx wants to buy Israel’s Mellanonx, reports have emerged that Microsoft is interested, too. No further details were available on the Microcoft offer, but sources in the capital market said the U.S. company had retains Goldman Sachs to advise in negotiations. Xilinx reported offered $100 a share for Mellanox, valuing the company at $5.5 billion. The news caused Mellanox shares to soar 48% to a peak of $97.48, but they pulled back subsequently.  On Wednesday, they were trading up 4% at $92.46 in New York at midday ocal time. Based in the Galilee town of Yokneam Illit, Mellanox sells networking hardware used in data centers, including Ethernet switches and cables for connecting switches to other hardware. Acquiring Mellanox and turning it into a research and development unit would provide Microsoft with a technology edge over rivals and prevent them from using Mellanox products. (Yoram Gabison)

Elbit’s IMI Systems wins $200 million Pentagon contract

IMI Systems, which was acquired by Elbit Systems last month, has won a contest with Israel’s state-owned Rafael to land an estimated $200 million contract from the Pentagon to supply armor for Bradley Fighting Vehicles. IMI won the contract for its Iron Fist active protection system after years of testing by the U.S. military. The system is designed to prevent line-of-sight guided anti-tank missiles/projectiles from acquiring and/or destroying a target. Iron Fist combines radar and an optional passive infrared detector to detect imminent threats, and launches a projectile interceptor that explodes very near the threat, destroying or deflecting it without detonating its warhead. The system is similar to Rafael’s Trophym which is deployed on Israel’s Merkava tanks and American M1 tanks. Elbit shares ended 1.2% up at 470.20 shekels ($125.17). (Eran Azran)

Government panel to work on way to coordinate crypto-currency regulations

Israel is beginning an effort to better coordinate its policies on crypto-currencies like bitcoin and block chain and other distributed ledger technologies. The Bank of Israel said on Tuesday that committee had been formed to create a knowledge base on the issue for regulators and the public, and to formulate recommendations for how polices can be better coordinated between different regulators. The government last addressed the issue in a coordinated way in 2014 but since the crypto-currency segment has exploded and different Israeli regulators have adopted rules independent of each other. “Digital currency users in Israel face challenges every day is using their money for transactions,” said Meni Rosenfeld, chairman of the Israel Bitcoin Association. Among those challenges, he said, is by law having to report to tax authorities and pay tax if they use a crypto-currency to buy lunch. The team will be taking comments from the public through the end of the year. (Avi Waksman)

Stocks snap three-session decline with sharp move higher in final hour

A sudden move higher in the last hour, as technology shares boosted Wall Street, gave Tel Aviv shares their first daily rise in four sessions. The benchmark TA-35 index rose 0.55% at 1,558.85 points, while the TA-125, climbed 0.65% to 1,407.92, on turnover of 1.45 billion shekels ($390 million). Leumi led bank stocks higher, climbing 2% to 24.09 shekels after it said it would report a 96 million shekel pre-tax profit on a share swap completed this week with Direct Insurance. Mizrahi Tefahot gained 2.1% to 12.63 and Hapoalim 1.5% to 25.12. Elbit System rose 1.2% to close at 470.20. But Teva Pharmaceuticals extended its losses for a fourth straight session. It fell 2.5% to 64.60 shekels, despite Meitav Dash analysts raising its shares to a Market Outperform with a $23 price target. B Communications plunged 22% in the last five days to close down 5.9% on Wednesday at 23.52. Its Bezeq subsidiary fell 2.8% to 3.77. (TheMarker Staff)