ISA threatens Bezeq dividend distribution
Israel Securities Authority's letter of opinion advises court that approval of Bezeq's NIS 3 billion dividend distribution over three years will call for re-examination prior to each dividend payment
ISA supports a petition from June by Segal-Levi Yizum Ve'nechasim headed by attorney Shahar Ben-Meir – a Bezeq bondholder - who alleges that Bezeq is prohibited from distributing a NIS 3 billion to its shareholders as the funds were raised not over a three-year period but in a single placement of three bond series held two weeks ago.
According to Segal-Levi, the instant financing round immediately shaves interest rates from Bezeq's bonds. Bezeq intends to pay dividends in six half-billion-shekel semi-annual payments, the first of which has already been distributed. Bezeq strongly objected to the appeal arguing that once it had received the court's approval for the dividend distribution it was a fait accompli.
Bezeq has no reserve earning suitable for dividend distribution therefore on January it appealed to court equipped with a letter of opinion from financial consulting firm Giza-Singer-Even in which it claimed that "there is no foundation for concerns that the NIS 3 billion capital reduction will prevent Bezeq from meeting its obligations."
The court approved the capital reduction and dividend distribution. Ben-Meir claimed in his petition that Giza's letter of opinion is irrelevant and that the company rating was only relevant at the time. He claims that there is no need to prevent the dividend distribution; however, Bezeq should be ordered to prepare a revised opinion by Giza which would re-examine previous conclusions.
Following the petition, Tel Aviv District Court Judge Danya Kareth Meyer ordered ISA to submit by next Sunday an opinion that would determine whether any changes had occurred in the company's solvency. The Authority, headed by Shmuel Hauser, stated that before each dividend distribution from now on the company's board is to examine Bezeq's solvency and it will assume full responsibility for its decision.
ISA's position is that Bezeq'a directorate shall be obligated to determine whether any substantial changes have occurred in the company from the time it received approval for the dividend payment until the time of distribution, and to re-examine whether the law allows the company to distribute such dividends.
Furthermore, ISA determined that Bezeq cannot obtain a one-time authorization to distribute dividend three years ahead.
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