Bethel Finance: "Tshuva has his work cut out to pass the arrangement"

www.bethelfinance.com
A day after the handshakes, the toasts, and the photo ops, some Delek Real Estate Ltd. (TASE: DLKR) bondholders do not feel part of the festivities, and are seeking to convene a bondholders meeting with the aim of obtaining an "improvement heat" for the company's proposed debt arrangement. Delek Real Estate is controlled by Yitzhak Tshuva.

"Analyst opposes the settlement" sources at the investment house controlled by Shmuel Lev and Ehud Shiloni, and managed by Itzik Shenidovsky, which has holdings in the series 5 bond, said today.

Analyst is not alone. Other bondholders who oppose the settlement said today, "Those in favor of the plan achieved are a small proportion of the bondholders. Yitzhak Tshuva will have his work cut out to gain the agreement of 75% of the bondholders, as required in order to approve the proposal."

An investment manager from one of the institutions that oppose the settlement explained his opposition today. He argues that, under the debt arrangement that Tshuva proposes, in the first year of the arrangement the bondholders will receive only NIS 90 million: NIS 40 million that Tshuva has committed to inject in cash, and one fifth of the NIS 250 million that he is due to inject over the next five years.

In his view, Tshuva's remaining undertakings under the arrangement are not worth a great deal. Thus, for example, Tshuva undertook to provide guarantees through his private companies. "Why didn't he give a personal undertaking?" this manager asked. "Who are these companies? Can I rely on companies the names of which I don't even know to pay the bondholders NIS 50 million a year, and to buy Delek Real Estate shares in the future?"

According to this investment manager, the return that the bondholders can obtain without a settlement is greater, amounting to NIS 183 million next year. "It's a matter of commitments that Tshuva took upon himself, which he now repudiates," he said.

For example, Tshuva undertook to buy Delek Real Estate bonds to the tune of NIS 63 million by July 2012. Tshuva has already announced that he will transfer NIS 13 million of this sum to the holders of bond 25, so that it remains for the rest of the bondholders to receive a further NIS 50 million.

The investment manager also mentioned an undertaking by Tshuva to participate in a rights issue by Delek Real Estate, to the tune of NIS 75 million in each of the years 2011 and 2012, making NIS 150 million altogether. In the rights issue that the company made in early 2011, Tshuva injected NIS 30 million, meaning that he is obliged to inject a further NIS 120 million into the company. Together with the NIS 63 million, he "owes" his bondholders NIS 183 million, which is double what he is offering under today's proposed settlement. This is one reason that some of the bondholders object to the proposal.