Malam to Raise NIS 45m in Private Bond Placement

For some time now, companies in the Gad Zeevi group have suffered what may be termed "the Zeevi discount" - a loss in value reflecting connections to the beleaguered businessman whose financial straits have forced the banks to write off debts of several hundred million shekels.

Once bitten, twice shy - so the banks will not be rushing to lend Zeevi further funds. Moreover, shares in some of the companies have been mortgaged to the banks as security for existing loans. Finally, however, there may be a light at the end of the tunnel: One of Zeevi's companies is to raise NIS 45 million through a private placement.

The company is Malam, an IT company traded on the Tel Aviv Stock Exchange, which plans to issue debentures in the next few weeks. Malam CEO Gilad Rabinowitz would not comment on the company's connections with Zeevi, nor would he be drawn on whether he plans to lead a management buyout (MBO) of the company in the future - a move that other companies, like Tadiran, have successfully undergone.

What was clear, however, was Rabinowitz's faith in the company and its future. He did not redeem his stock options back in 2000, when the company was trading at three times its current value. The paper losses from this decision could have paid for a handsome villa.

But in 2003, when prospects looked bleak, Rabinowitz managed to salvage some of the loss when Malam decided to buy back some of its debt. Its bonds were trading then at junk-yield levels, and the buyback, which cost Malam NIS 26 million, earned the company a tidy profit. "We wanted to buy more," said Rabinowitz, "but large parties then began to buy and the price went up."

Since then, much has improved. Malam's bonds are trading at yields of 5.7 percent, which encourages it to go back to the market and offer new bonds. And Malam could use some of the funds to buy a software company that would help it boost its growth even beyond its current 15 percent.

Malam will soon announce it is buying e-Top, which deals in SAP software solutions for small businesses for NIS 2 million. But Malam is also eyeing another software company valued at around NIS 25 million.

On this, Rabinowitz is more open to comment. "This is the best time to buy assets, because, paradoxically, companies' prices have actually dropped recently."

"During the market's difficult period, owners of small businesses held onto their firms, because they thought the bad times would pass and they would recover," he explained. "But now they see that this period has indeed passed, yet they are still left with problems. They have difficulty paying national insurance and income taxes, the banks are putting pressure on them, and they have no breath left to make that jump from the current position. So they are selling."