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Ahead of the debt settlement at Yitzhak Tshuva-controlled Delek Real Estate Ltd. (TASE: DLKR), the largest in the current wave of settlements, "Globes" asked large investment institutions for their official response to two questions: how much capital should Tshuva inject into the company as a condition for their consent to the settlement; and whether the debt settlement would affect their decision to participate in future offerings by subsidiaries of Delek Group Ltd. (TASE: DLEKG), which he also controls.
The institutions' answers were clear. Although some of the answers were only generalities or implicit, with only Altshuler Shaham Ltd. co-CEO Gilad Altshuler setting a figure, nearly all agreed that Tshuva should greatly increase the capital that he will inject into Delek Real Estate as part of a debt settlement.
Although the writing was on the wall for a long time, only in July 2011 did Delek Real Estate admit that it could not repay the NIS 2.1 billion owed to its bondholders. Negotiations on a settlement officially began in November. Tshuva initially said that he would inject NIS 250 million into the company, but the public pressure that followed a "Globes" exposé of the amount, prompted him to say that he would increase the amount, although he did not say by how much.
As for the first question, Altshuler told "Globes", "It's not only the money, it's the effort. In money, his share should be NIS 600-700 million, spread out of a long period. Everyone understands that Tshuva does not have a lot of capital to inject, so NIS 50 million a year over 12 years is reasonable, and will also force the company to handle its affairs reasonably."
Similar response were made by Yelin Lapidot Investment House Ltd., which said, "The controlling shareholder should substantially improve his initial offer"; and by Meitav Investment House Ltd., which said, "We oppose the settlement in its current structure, and we believe that the company needs a greater capital injection by its owners, in order to rebuild it and provide a new horizon."
The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), which Tshuva controls through Delek Group, declined to respond to the question at all, and Phoenix subsidiary Excellence Investments Ltd. (TASE: EXCE), only said, "It would be unprofessional to cite an isolated number related to one parameter of the settlement."
As for the second question, most of the responses were in the spirit of, "if we don’t like the Delek Real Estate settlement, we won't participate in Delek Group offerings. Altshuler was the most explicit, saying without hesitation that Delek Group should be punished in such an event. "Nothing will happen if we forego investing in one conglomerate in Israel. As the non-banking credit market appears, there will be a lot of opportunities here, and it's possible to forego one of them," he said.
Yelin Lapidot offered a similarly combative spirit, saying, "If the controlling shareholders appears unwilling to substantially help the company, this will be taken into account in future offerings by Delek Group, and is liable to result in demands for higher yields."
DS Apex Holdings Ltd. (TASE:DSAP), controlled by Eli Barkat, said that it would demand from Delek Group "extra interest, in view of its unclean credit history."
Some of the answers were only implicit. Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) said that it would seek maximum interest in future offerings, and Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) said that the debt settlement was one of the many considerations in its future investment decisions.
Despite, its ties of ownership to Tshuva, Excellence, run by CEO David Baruch, gave a clear answer, saying, "Excellence's policy with regard to debt settlements is identical, irrespective of the company's ownership. There is no doubt that companies' conduct in a debt settlement is a factor that investment institutions look at, and will look at when the time comes to make new investments, and this is true for Excellence as well."
Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and Menorah Mivtachim Holdings Ltd. (TASE: MORA), which are both participating in the representatives of Delek Real Estate's Series 25 bond, said on behalf of their representatives that they could not respond to the first question because they were in the midst of negotiations. As for the second question, the companies' representative said, "We advise institutions to consider not participating, in view of the proposed contribution, conduct, and cooperation by the parties facing us."
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