Foreign fund in talks to buy DGRE

A foreign fund that manages $5 billion in assets signed a memorandum of understanding for the acquisition of Delek Real Estate, Calcalist has learned, in an agreement which will see controlling shareholder Yitzhak Tshuva pour money into the company.

In response to the Calcalist report, Series 4 and Series 5 bonds leapt 6%.

Furthermore, Calcalist learned that the fund will pour NIS 500 million ($140 million) into the company in the form of a junior loan, in return receiving Tshuva's stake in the company.

Under the terms of the agreement, Tshuva will waive his rights over a NIS 120 million ($34 million) debt repayment from the company and pledge to transfer another NIS 100 million ($28 million) to the company in return for new shares.

Overall, the financing package includes a NIS 600 million ($170 million) funding for the company against a NIS 1.3 billion ($370 million) debt to bondholders.

Over the next two weeks, the foreign investor will perform due diligence reviews of the company and upon its satisfactory completion the parties intend to sign a detailed and binding agreement.

During the 60 days from the moment the binding agreement is signed between the parties, the foreign investor and the company's bondholders will hold talks to formulate and agree on an outline for the company's repayment schedule.

As aforementioned, such an outline will not include a reduction of the debt principle to the company's bondholders; however, it may include a postponement of the agreed repayment schedule and negotiations over the interest rate. The outline agreed upon by both parties must be approved within 120 days.

Bonds buy-back

The Series 25 bondholders are expected to hold a meeting Sunday. The bondholders of this series decided at the beginning of the month on a bonds buy-back of the non-negotiable Series 1 bonds for NIS 20 million ($5 million).

Calcalist has learned that most of the buy-back has been performed after the institutional bodies holding the bonds decided to accept the move in light of Delek Real Estate's instability; however, Migdal Group and another institutional body are holding off on their decision.

Menora Mivtachim Group held some NIS 4 million ($1 million) in Delek Real Estate bonds; Migdal holds some NIS 2 million ($560,000) of the company's bonds and the Phoenix and Excellence (both held by Tshuva's Delek Group) held some NIS 3 million ($850,000) in the company's bonds.

About a moth ago, DGRE announced that it would request its bondholders to allow a postponement of the principle repayment for the Series-25 bonds until the end of January in return for an agreement on an interest rate hike. The company seeks to postpone a NIS 310 million ($87 million) payment which constitute 50% of the principle balance.

All together, Delek Real Estate owes bondholders some NIS 3.1 billion ($870 million).

Following Calcalist's report of the possible conflict of interests of Shlomo Zohar's appointment as Tshuva's representative in the negotiations with the bondholders, Tshuva and Zoahr agreed last weekend that Zohar shall not represent Tshuva as the former is also the president of Entropy which provides voting consultation to institutional investors in bondholders meetings.

Click here to read this report in Hebrew 

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