Tempo Beverages Company Raising Money to Brew Heineken

Tempo Beverages plans to raise NIS 120 million by issuing bonds to finance the construction of a logistics center in Netanya - and to buy equipment to brew Heineken beer. But the bond won't be backed by any collateral, nor will holders be allowed to demand their immediate redemption.

Collateral for bonds has been a flash point in relations etween institutional investors and corporate Israel. As the financial crisis broke out in 2008, prices of corporate bonds plummeted. The concern was all the more acute because so many of the bonds were unsecured.

The bonds, which the Midroog credit rating agency rated at a tepid A2 (equivalent to Moody's Ba3), will have a duration of 4.5 years and will bear interest of 5% to 6.9%.

The prospectus states that the company will have the right to issue another NIS 15 million in bonds to institutional investors. The issue is being handled by Poalim IBI Underwriting and Investments.

Tempo Beverages handles the beverage operations of Tempo Industries, a publicly traded company. Tempo Beverages is owned by Heineken International (40%) and Tempo Industries (60%), whose controlling shareholders are the Bar and Bornstein families.

Tempo Beverages manufactures Goldstar and Maccabi beers and distributes international beer labels imported from Europe, mainly Heineken.

The company also has controlled Barkan winery since 2009, and distributes soft drinks and mineral water (Pepsi, Jump, Aqua Nova, San Benedetto and San Pellegrino).

In November 2009, Tempo Beverages began distributing the energy drink Excel, after signing an exclusive 10-year agreement. In the future, the company will manufacture Excel in Israel.

For the first nine months of 2009, Tempo Beverages reported revenues of NIS 628 million, about NIS 10 million less than in the parallel period in 2008.

Operating profits were consequently down 7%, to NIS 38.6 million, and operating profitability declined from 6.5% to 6.2%. Even so, the company's bottom line was higher - about NIS 28 million for this period, compared to NIS 26 million in the parallel, thanks mainly to lower net financing costs.