The Ticker: Delek Drilling, Avner Plan $400 Million Bond Issue

Megureit planning to buy back shares just three months after IPO; Regulators exploring rules to ease share market listings by smaller companies; Banks supervisors sees 10% reduction in banking industry payroll by 2020

Energy Minister Silvan Shalom, right, and Yitzhak Tshuva, the controlling shareholder of Delek Group, on a drilling rig, March 27, 2013.
Moshe Binyamin

Delek Drilling, Avner plan $400 million bond issue

Delek Drilling and Avner, the two Delek Group firms with stakes in the Tamar and Leviathan offshore natural gas fields, are planning their first ever bond issue as limited partnerships. Unlike their 2014 “Tamar” bond, which was used exclusively in financing the gas field, the new issue will be for general corporate purposes – meaning it will be used to pay the companies’ shareholders (technically partners in a limited partnership) a dividend as required by securities regulations, minus deductions for corporate capital spending subject to shareholders’ approval.

Earlier this month, Delek and Avner said they planned a $100 million dividend for payment December 31. The bonds, which have a relatively high A1 rating from the Midroog agency, are payable in 2021. However, if the two companies reduce their combined 31.25% stake in Tamar to below 10.4%, they will have to immediately redeem half the bonds. Shares of Delek Drilling closed up 2.25% at 14.99 shekels ($3.93), while Avner rose 1.7% to 2.82. (Eran Azran)

Megureit planning to buy back shares just three months after IPO

Just three months after its initial public offering, Megureit said yesterday it was taking the unusual move of buying back 10-million-shekels ($2.6 million) of its shares. A real estate investment trust specializing in housing, Megureit raised 240 million shekels in an IPO, only to see its share price drop as much as 14% afterward. It appears that ultra-Orthodox (or Haredi) investors have been pressuring Megureit to launch the buyback in the hope of improving the supply-demand balance for the stock. Haredim bought heavily into the IPO after the stock was widely promoted in the community. Other investors, however, looked askance at the IPO coming at a time when residential property prices have been rising for years and are more likely to fall than continue climbing. “What was born in sin behaves sinfully. Megureit should never have been in the bourse – and certainly not at the price it was listed,” said one trader yesterday. Megureit ended up 4.3% to 90 agorot. (Eran Azran)

Regulators exploring rules to ease share market listings by smaller companies

The Israel Securities Authority is looking to create a new track for smaller companies to raise money, similar to the “Regulation A” program in the United States, as it battles a drop in trading volume and listings. ISA Chairman Shmuel Hauser said yesterday there is a “financing vacuum” in Israel in which regulation doesn’t do enough to help small- to medium-sized business. “We are examining the creation of a path with more lenient regulation that suits this range – similar to the U.S. Reg A,” he said during a speech at the Globes business conference in Tel Aviv. “Doing this will allow a fresh way of thinking, and a release from the conventional shackles that are not necessarily suited for small- and medium-sized businesses,” he added, without elaborating. Regulation A allows companies to sell securities to the public with easier disclosure requirements than for other publicly traded companies. (Reuters)

Banks supervisors sees 10% reduction in banking industry payroll by 2020

Israeli banks will cut about 5,100 jobs between now and 2020, a net reduction of about 10% in the industry’s payroll that will save it some 1 billion shekels ($262 million) annually, Banks Supervisor Hedva Ber said yesterday. At the same time, about 200 bank branches nationwide, or about 20% of the total, will be closed or merged, she told the Globes business conference. Ber, who has been encouraging the process with regulatory incentives, like permission to boost dividends, noted that Israeli banks’ cost-to-revenues ratio stood at 69.4%, compared with 63.8% for other countries belonging to the Organization for Economic Cooperation and Development, and they needed to move closer to the average. “After the reductions, banks will be more mobile and flexible,” said Ber, who said she was looking forward to an era of more efficient work practices and a greater reliance on digital banking. (Michael Rochvarger)

Record Wall Street closing gives a big lift to Tel Aviv shares

Inspired by a record closing on Wall Street over the weekend, Tel Aviv shares rallied yesterday while bond prices fell sharply. The blue chip TA-25 index rose 1.1% to close at 1,461.14 points, while the TA-100 added 1.15% to 1,278.85, on turnover of 743 million shekels ($195 million). Pharma stocks led the gains, with Mylan jumping 6.8% to 140.60 shekels, after it said Thursday it was cutting up to 10% of its workforce. Teva Pharmaceuticals gained 3.8% to 140 shekels. Ratio closed 4.85% higher to 35 agorot, paving broad gains for energy shares. Bezeq rose 1% to 6.95 shekels, even though Gil Datner of Leumi Capital Markets cut his target price for the stock to 7.40, from 7.80. Tech shares also rallied, thanks to gains of 4.5% for Maytronics (to 15.20) and 4% for Biotime (to 12.66). In the fixed-income market, the government bond due in 2041 skidded 0.64% lower to raise its yield to 3.4%. The 10-year Galil fell 0.43% to a yield of 0.61%. In the foreign currency market, the dollar and euro both strengthened by more than 0.8%, to 3.8180 and 4.0521 shekels, respectively. (Omri Zerachovitz)