Bethel Finance: Out of gas: Can Ampal repay NIS 145m next month?

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Bethel Finance news:
The threat to Channel 10 is the least of Yosef (Yossi) Maiman's worries. Yesterday, Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL), which Maiman controls, announced as though as a matter of routine that the Egyptian government gas pipeline had been blown up for the tenth time this year. The pipeline transports gas to EMG, which supplies Egyptian gas to Israel, and is Ampal's main holding.

In the past, the capital market's reaction to similar events has been swift and sharp, but it seems that investors in Ampal no longer get excited, and the company's share price did not fall far yesterday. On the other hand, Ampal bonds, issued in three series with an aggregate nominal value of about NIS 1 billion, are traded at junk levels of as much as 110% yield to maturity.

This yield reflects the market's utter lack of confidence in Ampal's ability to meet its commitments in full, because of the halt in regular supply of Egyptian gas since February this year. At the end of the third quarter, Ampal had liquid assets amounting to $108 million, of which $69 million was cash, about a third of the debt to the bondholders.

Last month, Ampal made the first repayment on the series A bonds, amounting to NIS 50 million (a fifth of the series). Since that date, the price of the bond has fallen by 50% to NIS 0.33, giving a yield to maturity, as mentioned, of 110%.

The price of the C bond, on which repayment of the principal falls due only in 2014, has fallen to a similar level, and it is traded at a yield to maturity of 48%. On the largest series, the B bond, amounting to NIS 600 million (including linkage), the company is due to make the first payment of interest and capital, totaling NIS 145 million, next month.

An interesting situation has arisen in this bond. Following the events in Egypt and the disruption to the gas supply, its price has sunk to NIS 0.48, so that anyone who buys it now could receive a 50% payback on his investment as early as next month.