raising debt in israel capital market - aes capital one · raising debt in israel capital market...

Raising Debt

in Israel

Capital Market

April 2017

CONTENTS

Who Did It Already? 3-5

Highlights 6-7

Overall Review

o Relative Size

o Rating Scale

o Interest Rate

o Collateral And Liquidation

o Real Estate

Information About BDO 15-17

BDO Offices Key Clients 18-22

Information About The Team 23-25

1

2

3

4

5

6

8-14

Who did it already?

Credit Rating

Duration Interest RateAmount

($ Millions)Amount

(NIS Millions)Month of bond IssueCompany

A2.il3.46.35% (None CPI)61236Jan 17All Year Holdings

A2.il3.995.85% (None CPI)44173Feb 16All Year Holdings

ilA5.05.85% (None CPI)104399Dec 14All Year Holdings

A2.il3.47.17% (None CPI)118432Jan 17All Year Holdings



ilBBB+4.18.85% (None CPI)1973Dec 15Brookland April Limited

ilBBB+4.36.40% (None CPI)3231243May 14Brookland April Limited

ilA2.436.00% (None CPI)1870Sep 16Copperline American Limited

ilA3.36.00% (None CPI)88399Oct 15Copperline American Limited

ilA5.445.10% (None CPI)73268Feb 17Copperline American Limited

A1.il4.394.90% (None CPI)71274Dec 16Cornerstone Group

A3.il4.276.80% (None CPI)41160Jan 16Delshah Capital



A2.il5.36.00% (CPI)156600Apr 15Extell Limited

ilA5.35.40% (None CPI)2731050May 14Extell Limited

U.S.real estate companies' bond issuance in the TASE in 2014 & 2015 & 2016 & 2017

RAISING DEBT IN THE ISRAELI CAPITAL MARKET

Who did it already?

Credit Rating


($ Millions)Amount


ilA-3.117.75% (None CPI)30116Sep 16GFI

ilA-4.27.75% (None CPI)58225Mar 15GFI

ilA-3.965.75% (None CPI)81299Mar 17GFI

Aa3.il4.494.25% (None CPI)248970Mar 16KBS SOR

ilA-5.115.70% (None CPI)2490Mar 17Klein International Group Limited

A1.il4.176.05% (None CPI)87335Aug 16Lightstone Enterprises Limited

ilA+5.46.05% (None CPI)52200Dec 14Lightstone Enterprises Limited

A3.il2.88.90% (None CPI)36138Sep 16MDG Real Estate

ilBaa17.48.90% (None CPI2596Sep 15MDG Real Estate

A3.il2.528.30% (None CPI)1140Jan 17MDG Real Estate

A3.il3.763.75% (None CPI)67247Apr 17MDG Real Estate

A3.il3.744.09% (None CPI)621Apr 17MDG Real Estate

Aa3.il5.04.20% (None CPI)3611400May 15Moinian Group

ilA+4.265.80% (None CPI)117451Dec 16Namco Realty

ilA5.06.90% (None CPI)34130Dec 15Spencer Equity Group



Who did it already?

Credit Rating


($ Millions)Amount


ilA3.366.40% (None CPI)1870Sep 16Strawberry Fields REIT Ltd

ilA6.56.40% (None CPI)58225Nov 15Strawberry Fields REIT Ltd

ilA2.955.05% (None CPI)1139Apr 17Strawberry Fields REIT Ltd

ilA3.366.40% (None CPI)1870Sep 16Strawberry Fields REIT Ltd

ilA5.185.15% (None CPI)64236Jan 17Spencer Equity Group Limited

ilBBB+3.637.40% (None CPI)75276Feb 17Southern Properties Capital

A3.il3.96.40% (None CPI)54211Nov 15The Klein Group

ilA-5.676.90% (None CPI)26101July 16The Leser Group Ltd

ilA-5.784.25% (None CPI)1871Mar 16The Leser Group Ltd

ilA6.46.90% (None CPI)73281May 15The Leser Group Ltd

ilA-3.454.41% (CPI)33120Feb 17The Leser Group Ltd

ilA+4.75.10% (None CPI)218847Mar 15The Related Companies

ilAA-5.854.35% (None CPI)65250Nov 16The Zarasai Group Ltd

Aa3.il6.34.35% (None CPI)66256Mar 16The Zarasai Group Ltd

ilAA-4.523.90% (None CPI)245898Feb 17Wharton Properties




Highlights

Filing with the Tel Aviv Stock Exchange (TASE)

Interest

• Single digit interest rate not linked to CPI – 4%-7%

• Coupon payable periodically

Principal

• Maturity to begin after 2-3 years if required

• Debt raising: 30% – 50% of equity

• Possible to avoid providing collateral or liens

Requirements:

• Min. equity required: $100M

• Min. assets fair value required: $250M

• Business plan and cash flow forecast enable debt repayment

Common security for issued debt:

• Secured by specific assets (senior lien)

• Subordinate after the bank

• Unsecured (with credit ratings)

Time to target- Process may take between 2 - 3 months

Costs-

Low-cost capital to finance real estate investments in comparison

to the United states


Highlights


Overall Review

The Israeli Capital Market is known to be small, remote and with low tradability,

and as such doesn't seem to be the natural choice for foreign companies.

But if so, why should foreign companies be interested in raising funds here?


Overall Review

There are a few main characteristics to the local market which provide foreign

companies a strategic and financial advantage with regards to raising

funds in the Israeli market:

Relative size

While they are considered small cap companies, which are not suitable for the

American Capital Markets and their investors' preferences, the Israeli market

perceives them as medium sized, and thus they receive the appropriate interest

and demand from local investors.


Overall Review

Rating scale

There is some difference between the global and local ratings of a company, due

to a lenient conversion table within the lowest part of the rating scale. In other

words, lower global rating levels are converted into an un proportionately high

local rating level.


Overall Review

Rating scale

The following is a global to Israeli rating scale conversion chart *:

*S&P Maalot official web site (www.maalot.co.il)

As can be observed in the table, a global credit

rating of (B) may be translated to a local credit

rating of (ilA-), by the local affiliate of the global

credit rating agency. This may be an inaccurate

evaluation in local terms.

Standard & Poor’s

National scale ratings

Local currency globalscale ratings

ilAAA‘BBB’ and Higher

ilAA‘BB’ or ‘BBB’

Ila‘B’ or ‘BB’

ilBBB‘B’

ilBB‘CCC’

ilB‘CCC’

ilCCC‘CCC’

IlCC‘CC’

SD‘SD’

D‘D’


Overall Review

BB+BB-Global credit

rating

BBB+AA+Local credit rating

3.36%2.44%2.08%Israel CPI

4.38%3.46%3.10%Israel None CPI

5.97%5.05%4.69%USD None CPI

Comparing average yields of rated bonds in Israel with duration 5 (06.04.17)

Interest rate


Overall Review

Collateral

Investors in bonds of foreign property companies with credit rating which is

medium and above usually do not require significant collateral, if any.

Liquidity

The Israeli institutional investors' market has a very high level of liquidity and

is keen to discover investment opportunities with low country risk.


Overall Review

Real Estate

The Israeli market shows increasing demand for real estate companies' bonds.

In the last three years, real estate companies' share of corporate bond issues

has gone up dramatically.

INFORMATION ABOUT BDO

5th

Largest Accounting

Firm In the World

1,408Offices

Worldwide

67,731Firm

Employees

158Countries

Europe, North American / Caribbean,

Latin America, Asia Pacific, Sub Saharan

Africa, Middle East

• BDO established in Europe in 1963.

• The firm specialized in providing

personal attention and professional.

• The firm is committed to a long

association with clients.

• The firm serves as a consultant to

costumers all over the world.

BDO WORLDWIDE

ORGANIZATIONAL STRUCTURE

The audit services provided by BDO include

Audit and review of financial statements; Ongoing tax consulting; Preparation of prospectuses and close

guidance in the public issuance of securities in Israel and leading stock exchanges worldwide; Accounting

due diligence; Consulting on accounting issues; Consulting on IFRS; Consulting on U.S. GAAP; SOX audit;

Issue of professional opinions; Ongoing representation with the tax authorities

Manufacturing TechnologyBanking &

FinanceReal Estate

MunicipalitiesDefense Industry &

National Security

Government

Organizations

Energy

oil & Gas

Agriculture Retail

NPO Health

BDO OFFICES KEY CLIENTS

BDO ISRAEL EXPERIENCE

.

The first bond issuance during the last trend

The first bond issuance of retail operations solely

The largest REIT in Israel

The largest banks in Israel

The second largest real estate company in Israel.

The largest nursing homes in Israel.

The largest bond issuance of a US real estate company in Israel

The first Florida/affordable housing company

BDO ISRAEL KEY CLIENTSBDO Israel provides services to the private, public and government sectors in Israel and

abroad, handling more than 300 public companies and mutual funds, traded on the Israeli,

UK and U.S. stock markets.

The firm's clientele includes leading companies in real estate and infrastructure, media,

communication, technology, software, retail, oil & gas, banking, manufacturing, automotive,

pension, shipping, capital markets, family-owned businesses etc.

BDO ISRAEL REAL ESTATE BDO Israel works with many of the biggest brands in the Real Estate & Infrastructure

industry. Our clients select BDO Israel for the quality of our dedicated practice, partner-led

teams, and industry knowledge.

BDO ISRAEL - GLOBAL CLIENT CREDENTIALS

GCH

INFORMATION ABOUT THE TEAM

BDO LEADERS

Danny Margalit C.P.A (Isr.)Relationship Partner

Chairman & CEO

Telephone : +[972-3-6382520]

Fax : +[972-3-6368750]

Mobile: +[972-52-3200392]

Email: [email protected]

EXPERIENCE

Danny Margalit has over 30 years of experience providing accounting and consultancy services for

leading Israeli, US and European companies. Danny experience includes many integrated

engagements with BDO international firms, mainly in the US and Europe.

Danny specializes in cooperating with foreign investment banks, public flotation of Israeli

companies in the U.S. and in Europe, mergers and reorganizations of companies. In addition, he

also specializes in accompaniment of start up companies.

BDO LEADERS

Hofit Gotesdyner C.P.A(Isr), Adv, MBAAudit Partner

Real Estate Cluster

Telephone : +972 [3-6386839]

Fax : +972 [3-6374341]

Mobile: +972 [ -52 8941894]

Email: [email protected]

EXPERIENCE

Hofit Gotesdyner has over 20 years of audit and business advisory experience. Since Hofit joined

BDO Israel, she has worked in audit and consultancy to public and private companies in various

sectors and issues.

Hofit has vast experience with auditing Real Estate companies. She lead many IPO’s for local and

global companies at the TASE.

Hofit has also been involved in the evaluation and structuring of mergers and acquisitions as well as

the performance of due diligence procedures.

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