Israeli financial institutions won't lend the utility NIS 2 billion to finance current operations and fuel purchases.
Israel Electric Corporation (IEC) (TASE: ELEC.B22) is considering raising more capital abroad, due to the problems it is having in raising NIS 2 billion from Israeli financial institutions to finance its current operations. This would be IEC first return to international markets after it was forced to promise nearly 10% interest in its previous foreign bond raised in the aftermath of Lehman Brothers' collapse in September 2008.
IEC needs capital to buy diesel, to replace the natural gas that is not being delivered from Egypt. Negotiations with Israeli financial institutions are deadlocked, with the institutions refusing to participate in IEC's proposed offering. Some institutions demand that IEC provide real collateral as a fundamental condition. The demand is based on the Hodak committee requirements for greater collateral in exchange for raising capital from financial institutions, as well as assessments that IEC may struggle to repay its debts, which already total NIS 62 billion. The institutions say that more debt would further burden IEC's already very problematic clearance schedule.
The financial institutions are demanding liens on IEC assets. IEC offered NIS 4 billion in floating liens as collateral on capital raised from the institutions this year, but it is now seeking to expand its 22 Bond series, which is traded on the TASE, and which is not backed by any collateral at all. IEC is legally barred from offering a lien only to the participants in the expansion of the bond. The institutions want IEC to issue a new bond, but this would take time.
Published by Globes [online], Israel business news - www.globes-online.com - on November 24, 2011
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