The corporate bond market is still red hot. Last week, Israel Railways completed the institutional stage of its bond issue, raising NIS 860 million, while enjoying a large over-subscription amounting to NIS 4 billion.
Israel Railways noted that the issue was composed of two series. NIS 509 million was raised at 1.24% fixed interest with an average duration of 3.6 years, and NIS 349 million was raised at indexed-linked interest of 0.6% with an average duration of 3.7 years. The specifications for the bond issue show that in addition to the institutional investors, such as Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5); investment houses Poalim IBI Underwriting and Investments Ltd. (TASE:PIU) and Excellence Investments Ltd. (TASE: EXCE); and nostro players frequently taking part in bond issues; there were several other interesting names in the preliminary tender: Citibank, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Osem Investments Ltd. (controlled by Nestle SA (SWX:NESN)) (TASE: OSEM) chairman Dan Propper, advertiser and technology entrepreneur Ilan Shiloach, the Tel Aviv and Central Region Chamber of Commerce, Kibbutz Sasa, the Jewish National Fund, and others.
Israel Railways is seeking to raise a total of NIS 1 billion, with the public stage of the bond issue slated for the coming days. Israel Railways CEO Boaz Tzafrir said the money "would be channeled towards expanding the railway infrastructure, including the Negev railway line (Ashkelon-Beersheva), the high-speed train to Jerusalem, and the electrification project. Israel Railways will also invest in expanding its customer service."
The bond issues continues the intense activity typical of the corporate bond market in recent months. Spurred by the low interest rates in the market and strong demand for corporate offerings, stock exchange-listed companies continue to raise all the debt they can.
Real estate and banking still dominant
In recent days, US real estate companies Related and GFI raised NIS 850 million and NIS 225 million, respectively. Demand for these issues was also strong, and other US real estate companies are planning to raise hundreds of millions of shekels more in order to take advantage of the strong demand for corporate offerings in the local market. The three largest offerings on the agenda expected to take place soon are by Bank Hapoalim (TASE: POLI), First International Bank of Israel (TASE: FTIN), and income-producing real estate company Melisron Ltd. (TASE: MLSR), with revised ratings by S&P Maalot and Midroog for the issues. Maalot and Midroog rated the Bank Hapoalim offering AAA and Aaa, respectively, with a stable outlook, for a huge issue of up to NIS 2 billion. Last October, Maalot upgraded Bank Hapoalim from AA+ to AAA. The two rating companies gave First International Bank ratings of AA plus and Aa1, with a stable outlook, for an offering of up to NIS 1 billion in the near future. Maalot upgraded its rating forecast for Melisron from A plus stable to A plus positive for an offering of up to NIS 900 million. Maalot believes that Melisron's debt ratios will improve in 2015-2016, and that "the company will continue to maintain appropriate coverage ratios and its current business profile." Another company announcing today its intention to raise debt (NIS 150 million) is Africa-Israel Investments Ltd. (TASE:AFIL).
Bank Hapoalim, First International Bank, and Melisron were the most prominent issuers in 2014, and are expected to continue the recent dominance of real estate and banking in the bond market.
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2015
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