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Issuance of bonds to the public in Israel by US Companies


In the last few years, large debt issuances by US corporations have become a familiar sight in the Tel-Aviv Stock Exchange. These US corporations were taking advantage of the opportunity to diversify their capital resources by issuing rated corporate bonds with attractive rates. During 2017, the total amount of debt raised by foreign corporates in the Tel-Aviv Stock Exchange exceeded $2 billion.

For your education you can find below some initial commercial information about these debt issuances:
 
  • The main advantages of the Israeli market include: (i) rating arbitrage -Israel's local rating is significantly higher than the international rating; (ii) size advantages -low/medium US based corporations are considered sizable in the Israel market; (iii) assets are presented at fair value in accordance with IFRS; (iv) high and stable cash availability driven by saving regulation; (v) investors increase their exposure to global markets; (vi) fewer local issuers compared to other markets; (vii) soft covenants; (viii) Israeli local corporate bonds are usually traded at a low spread over Israeli government bonds.
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  • Examples of US based issuances in Israel (unsecured)[1].
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  • Duration- an average debt raising process may take between 3 – 4 months.
  • Estimated Costs: (a) advisor commissions- 2-3% of total issuance; (b) legal, accounting and appraisals fees- USD 500k - USD1 million; (c) costs of travel and staying in Israel; (d) annual 'maintenance' fee for a public company - approximately USD300-400k.

In conclusion, issuance of bonds in the current Israeli stock market is an opportunity to raise relatively low-cost debt for suitable corporations. Such suitability derives mostly from the corporate's assets, equity, service coverage ratio and local Israeli rating.

[1] As of January 2018, based on external sources.
Alon Binyamini, Head of Capital Markets

Telephone: 972-3-7770160

Email: alonb@ebnlaw.co.il

Naama Levi, Capital Markets Partner

Telephone: 972-3-7770160

Email: naamal@ebnlaw.co.il


 
Capital Markets

Erdinast, Ben Nathan, Toledano & Co. is regularly sought out by a wide range of publicly listed companies with a range of needs in relation to the capital markets. Our experience and reliability ensure we are a trusted advisor for public offerings both on the Tel Aviv Stock Exchange (“TASE”) as well as the US’ NASDAQ and UK’s AIM markets and other stock exchanges.

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