Crock Solid / The Inexplicable Ascent of Engel Stock

Veteran market animals stood agape last week and this as Engel Resources and Development shares gamboled before their astonished eyes. It has been a long time since a share rallied like Engel's has recently. From February 8 to February 21, this past Sunday, the stock more than doubled in price, before dropping back somewhat on Monday. Meanwhile, the market has been anticipating conclusion of the saga over the company's debt rescheduling.

Several days ago, Engel's bondholders approved a plan for the company's acquisition by the EGRE-Tagor-Ackerman group in which Shaul Elovitch, one of the new controlling shareholders of Bezeq, is also involved. E

Elovitch's group beat out the Origo leverage fund for the right to buy Engel. This is good news for Engel, in that it puts the firm another step toward the creditors' arrangement which it had been waiting for so long, following difficulties the company encountered since being abandoned by American builder Shaya Boymelgreen.

Although the term "arrangement" has positive connotations for the company, it doesn't bode well for Engel Resources' shareholders. Not this time, in any event. Under the deal, EGRE-Tagor-Ackerman will receive 51% of Engel's stock in exchange for a capital infusion of NIS 45 million and a line of credit worth about NIS 45 million. Engel's bondholders will receive 39% of the shares and bondholders of the firm's subsidiary, Engel Europe, will get another 10% of the stock. This accounts for all of the company's shares, meaning that current stockholders will have their holdings totally depleted.

Somehow investors in the stock market seem to have overlooked this when they ran to purchase the company's shares.

"I've been trying to understand this all week," said one investment manager, who added, "Under this arrangement, shareholders are due to get precisely zero."